Elliott turns heat on Whitbread board
● Break-up talk as Us-based activist investor becomes largest shareholder
Whitbread is expected to come under pressure to separate its Costa Coffee and Premier Inn arms after an activist investor became the group’s largest shareholder.
Elliott Investors, which spent years pushing for change at Dundee-based Alliance Trust, now owns a stake of more than 6 per cent in Whitbread and the disclosure saw shares top the FTSE 100 risers board yesterday with gains of more than 7 per cent.
It is thought the Us-based investor will push for Costa and Premier Inn to become two separate listed entities, claiming it will unlock greater value for shareholders.
Costa is thought to be worth between £2 billion and £3bn while Premier Inn is valued at up to £8bn.
Elliott, which has a reputation for corporate activism, is understood to consider the pairing of Costa and Premier Inn under Whitbread to be an anomaly with no synergies. It is said to believe that as much as £3bn of value could be created by splitting the business.
It is not the first time Whitbread has been targeted by an activist. US hedge fund Sachem Head owns a 3.4 per cent stake in the firm and is also thought to be pushing for a separation of the two brands.
Numis analyst Tim Barrett said that the news piles further pressure on Whitbread boss Alison Brittain.
“We view the latest development as highly significant, meaning that close to 10 per cent of the company is now held by activist investors,” they said in a note yesterday.
“In our view it is entirely logical that the two businesses be split at some point, as the natural end game to the unpicking of the conglomerate.”
David Madden, market analyst at CMC Markets, said the onus will now be on the board of directors to offer an alternative to the proposed demerger plans.
Brittain has previously said she remains “entirely openminded about the structure of the business” and that she is committed to reviewing it on a “regular basis” at board level.
Whitbread has a history dating back to 1742 and has over the years owned a bevy of wellknown brands, such as TGI Fridays, Pizza Hut and Marriott Hotels.
The firm is valued at £7.7bn and employs 50,000 people. Costa, which Whitbread acquired in 1995 from founders Sergio and Bruno Costa, has more than 2,400 stores and is embarking on overseas expansion.
Latest figures from Whitbread showed lacklustre likefor-like UK sales across its Costa Coffee and Premier Inn divisions for the three months to 30 November.
Comparable sales from Costa rose 0.1 per cent while Premier Inn sales were flat in the three month period. Overall UK like-for-like sales were boosted by the restaurants division, where sales rose 1.8 per cent, lifting group UK likefor-like sales 0.3 per cent overall for the period, which Whitbread said reflected “recent tougher market conditions”.
Total UK sales, including new openings, were up 5.5 per cent in hotels, 3.5 per cent in restaurants and 7.2 per cent in Costa, leaving total group UK sales up 5.8 per cent.
Including international sales, sales across the group were up 5.6 per cent and Whitbread said it was on track to meet full-year expectations. Shares closed up 283p at 4,218p.
LEISURE “In our view it is entirely logical that the two businesses be split at some point, as the natural end game to the unpicking of the conglomerate” TIM BARRETT, NUMIS