Whitbread's sale puts bite into war chest

03 August 2006
Whitbread's sale puts bite into war chest

Whitbread could use the £112m proceeds from the sale of its 50% stake in Pizza Hut UK to mount a bid for Travelodge, according to City sources.

The holding was bought on Monday by Yum! Restaurants, which is the pizza chain's US owner and a 50:50 franchise partner with Whitbread across the group's 600 UK sites.

Combined with last month's sale of 239 pub-restaurants to Mitchells & Butlers for £497m and its expected disposal of TGI Friday's for about £60m, Whitbread will have amassed a war chest totalling close to £655m.

Numis analyst Simon French said that this figure was close to Travelodge's reported £700m price tag. "It would be completely logical if they now tried to acquire it," he said.

The Yum! deal, which is expected to complete by October this year, has been on the table for some time and was first reported in Caterer more than a year ago.

Another City source agreed that Whitbread would probably be eyeing up Travelodge, but pointed to other options. "They could also return a chunk of it to shareholders or use it to build on their core assets," he said.

However, one senior industry figure doubted whether a tie-up with Travelodge would get the nod from the monopolies regulator. "I just don't see it happening," he said.

Whitbread chief executive Alan Parker hinted that the leisure giant would now concentrate on its key brands of Premier Travel Inn, Costa
Coffee and David Lloyd health clubs. He said: "Our exit from this joint venture is further evidence of the continuing progress we are making towards becoming a leaner and more focused group."

By Tom Bill

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