Whitbread disposal of
Marriott hotels
14th March 2005
Alan Parker
Chief Executive
Strategic framework
October 2004 – Following business review,
Whitbread sets out three strategic principles:
• Invest
in businesses capable of generating
significant growth and economic profit
• Release
capital from under-performing and
non-core businesses
• Return
surplus cash to shareholders
Today’s announcement
(subject to shareholder approval)
• Whitbread
to exit operation and ownership of
Marriott hotels
• At
least £1bn expected to be realised by
Whitbread within two years
• Significant
return of cash to Whitbread
shareholders
• Exit
improves Whitbread’s return on capital
• Return
of cash enhances Whitbread’s earnings
per share
The transaction
• Whitbread
and Marriott International establish
50/50 joint venture to hold hotel properties
until sold
• Whitbread
receives initial consideration of
£710m cash
• Marriott
International to operate hotels under
long-term management contracts
• Total
Whitbread realisation expected to exceed
£1bn within two years as joint venture sells
hotel properties
A complete exit
• Creates
more value & realises more capital in
shorter timeframe
• Marriott
International’s management of hotels
enhances asset values
—
Elimination of franchise fee
—
Cost synergies with Marriott International
Distribution of initial proceeds
• £710m
realised upon completion of transaction
—
£400m return of cash to Whitbread shareholders
—
£100m reduction of Whitbread pension deficit
—
Balance to repay Whitbread debt
Mechanics of capital return
• £400m
to be returned via special dividend
—
135 pence per share
—
Approximately 14% of market capitalisation
• Share
consolidation to maintain comparability
Transaction schedule
(subject to confirmation)
• Circular
sent to shareholders by 31 March 2005
• Extraordinary
shareholders meeting 22 April
2005
• Sale
to joint venture completes 5 May 2005
• Special
dividend payment by June 2005
Points of note
• Deadlocked
joint venture - no intention to
consolidate by either Whitbread or Marriott
• Goodwill
•8
– expect to recover as part of proceeds
Whitbread Hotel Company properties with
£75m NBV to be retained pending disposal
Foundations for the future
•
•
•
•
•
July 2004
— £505m acquisition of Premier Lodge
October 2004
— Business review announced
November 2004
— £79m disposal of Courtyard by Marriott hotels
March 2005
— Premier Travel Inn integration completes, creating UK’s
largest hotels business
— Decision to exit Marriott and return £400m to shareholders
April 2005
— Arrival of Chris Rogers as finance director completes new
management team line-up
Further release of capital
• At
least £290m to come from joint venture asset
sales
• Additional
c.£300m to be realised from
non-core and underperforming assets
—
Whitbread Hotel Company retained assets
—
German restaurants
—
Pub restaurants ‘tail’
—
Britvic (23.75% holding)
Whitbread 2005
Capital focus (net assets by sector)
2004/5*
£m
FY 2003/4
£m
545
533
1,158
1,096
846
912
515
Budget hotels
Restaurants
Health &
fitness clubs
Full service hotels
* Pro forma estimate of assets based upon
Whitbread interim accounts 2004/5
(excludes Marriott and Britvic)
Whitbread 2005
• Leading
positions in three growth sectors of the
hospitality market
—
Budget hotels
—
Restaurants
—
Health & fitness clubs
• Disciplined
approach to expansion
• Opportunity
• Sustained
for greater synergies
creation of economic profit
Q&A
appendix
Joint venture assets
• 46
hotels
—
6 London
—
31 provincial
—
9 Marriott Hotel & Country Clubs
• 8,102
bedrooms
Joint venture assets
(46 hotels)
Marriott
London Kensington
Marriott Hotel & Country Club
Aberdeen
London Maida Vale
Breadsall Priory, Derbyshire
Bexleyheath
London Marble Arch
Dalmahoy, Edinburgh
Birmingham
London Regent’s Park
Forest of Arden, Warwickshire
Bournemouth
Manchester Airport
Hollins Hall, W Yorkshire
Bristol City Centre
Newcastle Gosforth Park
Meon Valley, Hampshire
Bristol Royal
Newcastle Metrocentre
St Pierre, Monmouthshire
Cardiff
Northampton
Sprowston Manor, Norfolk
Durham Royal County
Peterborough
Tudor Park, Kent
Edinburgh
Portsmouth
Worsley Park, Manchester
Glasgow
Preston
Renaissance
Grantham
Sheffield
Derby/Nottingham
Huntingdon
Slough
Solihull
Inverness
Sunderland
Leeds
Swansea
Liverpool City Centre
Swindon
London County Hall
Waltham Abbey
London Heathrow
York
Whitbread Hotel Company –
retained assets
Marriott
Marriott Hotel & Country Club
Liverpool South
Goodwood Park, West Sussex
Leicester (under construction)
Hanbury Manor, Hertfordshire
Manchester V&A
Treudelberg, Germany
Other
Norwich Nelson (Swallow)
The Brewery Conference & Banqueting Centre, London
• 8 properties
• £75m net book value
• Assets retained pending disposal
Operation of the joint venture
•
Joint venture board comprises six members: three
nominated by Whitbread; three nominated by Marriott
International
•
Joint venture to operate Disposal Steering Committee
responsible for asset sales. Committee comprised of:
two Whitbread representatives; and two Marriott
International representatives
•
Marriott International to provide management services
to the joint venture
•
Exit mechanisms ensure dissolution of joint venture