Two new contenders join race for Premier Lodge budget chain

The race to buy budget hotel chain Premier Lodge is hotting up, with two new contenders registering their interest.

Late last week hotel group De Vere confirmed that it had been in discussions with private equity group Sun Capital with a view to "co-operating" in the acquisition of Premier Lodge.

And this week sources said stockbroker Collins Stewart had bid about £560m for the chain.

The move from De Vere has come as no surprise to analysts and industry observers because its recently installed chief executive, Carl Leaver, was formerly managing director of Whitbread's budget hotel chain, Travel Inn.

Under the deal, Sun Capital, the investment vehicle of PizzaExpress founder Hugh Osmond, would supply most of the cash, while De Vere would operate the existing hotels and acquire most of the properties under development and the rights to the Premier Lodge brand - including the right to use it for future expansion, either with Sun Capital or without.

If Collins Stewart wins the battle for Premier Lodge, it is expected to launch the 120-strong chain on the Alternative Investment Market. The current management team at Premier Lodge is expected to be retained.

Collins Stewart and De Vere's involvement in the auction could provide some real competition for Whitbread, which was thought to have been the favourite to buy the chain.