Whitbread (AO) | Hold | Looking for immediate value crystallisation

Research evidence excerpt

Whitbread (AO) | Hold | Looking for immediate value crystallisation

reduction in gross capex spending during the plan) and GBP2bn of free cash flow available for

shareholder returns by FY31. Corvex instead wants Whitbread to suspend non-essential capex, pause further sale-and-leaseback

transactions during any sale process, and redirect cash toward share buybacks rather than continued expansion.

The activist argument rests on valuation (market capitalisation was c. GBP3.8bn at Friday’s close, down c.18% over the past year).

Whitbread’s latest independent property valuation put its freehold and long-leasehold estate at GBP5.5bn–GBP6.4bn, versus

GBP4.9bn–GBP5.8bn in 2018. The valuation used a 5.5%–6.5% net initial yield range, 2.0x rent cover, and included GBP760m of

non-trading assets and assets under construction. Corvex argues the market is effectively assigning little value to Whitbread’s

operating business, German platform and development assets.

A take-private scenario?

Potential buyers would most likely be financial rather than purely strategic, in our view. A private equity/real estate consortium

looks the most plausible structure, combining an operating company buyer with a property capital partner. Possible types of

buyers include large private equity funds such as Blackstone, CVC or Brookfield, potentially alongside real estate or sovereign

wealth capital. Strategic hotel groups such as Accor, IHG, Marriott, Hilton, Choice or Wyndham could look at Premier Inn, but a full

acquisition is less obvious given Whitbread’s asset-heavy structure (especially for IHG or Accor in our view). We do not see an

acquisition by another private company (B&B or MotelOne) given the size of the deal, the UK footprint of Whitbread (not the