to take over the Princess chain of hotels.

The US group -- thought to be an existing hotel chain -- are a surprise challenge to Saudi Prince al-Waleed bin Talal, who had been predicted to take over six of the ten-strong Princess group, including the two Bermuda hotels, for $560 million.

A spokesman for current owners, UK conglomerate Lonrho, said: "We are in the course of negotiations.'' But the spokesman was tight-lipped over who was likely to buy the two local hotels.

He added: "It would be inappropriate to confirm who we are talking to. We are talking to several people.'' And he said a final decision on the new owners could be expected "within weeks''.

Lonrho has never officially confirmed that the billionaire member of the Saudi Royal family was negotiating a deal for six of the hotels.

Now it is understood that the US firm is currently ahead of the pack in the bidding.

One problem with the Saudi bid is believed to be that -- due to a religious ban on gambling -- Prince al-Waleed is not interested in the Barbados or Bahamas Princess hotels, which both have casinos.

Tourism Minister David Dodwell said an ownership company, rather than an outright buyer, could be interested.

He added: "We have been poised for some announcement in the near future.'' The news came as a top executive of the Princess hotel chain was kidnapped in a Mexican gun battle which left a policeman dead.

US national Vincent Carrozza, Mexican regional vice-president of the ten-hotel chain, was dragged from his car near the Princess hotel in Acapulco by armed men dressed as Mexican federal police officers last Tuesday.

A Police patrol saw the incident and chased the kidnappers' truck. One officer died and another was seriously injured in an exchange of shots.

Yesterday, Stephen Barker, regional vice-president for Princess' Bermuda operation, said he was stunned by news of the kidnapping.

He added: "He is a very good friend of mine -- I've known him for 20 years.

"We're very close. It's a tragic happening. He has been to Bermuda many times.''