Whitbread tipped to win Premier Lodge

Travel Inn owner Whitbread has become the firm favourite to take over budget hotel chain Premier Lodge after its main rival Travelodge dropped out of the race.

French private equity firm PAI Management, whose bid was being led by former head of Scottish & Newcastle Retail Bob Ivell, is also understood to have dropped out of the auction in the first round.

However, Japanese bank Nomura and private equity group Apax Partners are still thought to be in the race to take over the 132-strong Premier Lodge estate, which was put up for sale by Spirit Group in February.

Whitbread, which has never denied its interest in the group, has always said it would not pay over the odds for the chain and is understood to be prepared to bid a maximum of £550m for it.

Spirit acquired the budget hotel group when it bought Scottish & Newcastle's pub estate in November 2003 for £2.5b. In January the group appointed investment bank Merrill Lynch to undertake a review of the hotels, which ultimately led to the whole estate being put up for sale.