Activist hedge fund pushes Premier Inn owner to put itself up for sale
Corvex Management says Whitbread has no credible plan to reverse 18 per cent share price slide in past year
Activist hedge fund Corvex Management is pushing for Premier Inn owner Whitbread to put itself up for sale after the FTSE 100 hotel group refused to overhaul its spending plans to turn around its ailing share price.
Corvex, which owns a 7 per cent stake, making it a top-five shareholder, has told Whitbread’s board that the “only credible path” to realising value for shareholders is launching a sale of the whole company.
“It is imperative that the board immediately retains an independent investment bank and makes a public commitment to conduct a rigorous and comprehensive sale process,” said Corvex’s managing partner Keith Meister in a letter to the board seen by the FT.
If Whitbread did not commit to a sale process, Corvex threatened to nominate a fresh slate of directors to the company’s board.
The intervention comes after Whitbread doubled down at a recent capital markets day on ambitious expansion plans to add 14,000 hotel rooms in the UK and Germany, funded by monetising its valuable freehold property assets — a strategy opposed by Corvex.
Pressure for a sale of Whitbread could set the stage for another high-profile exit from the UK’s marquee FTSE 100 index. FTSE 100-listed testing company Intertek and FTSE 250 ingredients maker Tate & Lyle are both considering takeover bids.
Whitbread did not immediately respond to a request for comment. Corvex declined to comment.
Corvex first went public with its stake in Whitbread last December, saying it wanted board representation and to work with the company on a strategic review, which would reassess Whitbread’s £3.5bn five-year investment plan.
Shares in Whitbread are trading at a 13-year low and are down 18 per cent over the past year, compared with a 17 per cent rise in the wider FTSE 100 index. Whitbread’s market value stood at £3.8bn, as of Friday’s close.
Corvex called for Whitbread to suspend any non-essential capital expenditure and all proposed sale-leaseback transactions of its UK freehold properties during any potential sale process. Instead, it said the company should launch a share buyback to return cash to investors.
The hedge fund noted in its letter that Whitbread was trading at a fraction of the value of the company’s vast freehold property portfolio, suggesting that “the market is ascribing zero value to Whitbread’s remaining leasehold business, its German hotel assets, and its development properties”.
Whitbread runs more than 850 Premier Inn hotels across its home of the UK and Germany. Whitbread, along with other UK hospitality operators, faced margin pressure from the UK government’s increase in business rates in the recent Budget.
Asked about activist pressure in April, Whitbread chief executive Dominic Paul told the FT that the company had spoken to “a lot of shareholders” and received a “clear message” endorsing its current business plan.
“Our plans have got to ensure that they are appealing for all our shareholders, not just a subset of shareholders . . . Fundamentally, the majority of our investors are interested in us driving medium- and long-term shareholder returns.”
Corvex said that it had raised “concerns directly and repeatedly with the board and management, yet rather than undertaking the substantive strategic change the situation demands, they have remained anchored to the status quo”.
Corvex — which is run by Meister, a former lieutenant of activist investor Carl Icahn — is the latest US activist hedge fund to agitate for changes at a struggling UK hospitality group. Corvex also previously targeted Ladbrokes owner Entain.