Sources close to the deal said despite talks between Premier Inn and Travelodge starting as far back as January they came to an abrupt halt on Wednesday after the value of Travelodge was deemed too expensive given the current global credit crunch.
Whitbread had been keen to do a deal with Travelodge's owner Dubai International Capital (DIC) to create a budget hotel super group with 800 hotels worth some £3b and had reportedly paid out millions in preparation fees but ultimately got cold feet.
Travelodge is believed to be concerned about the negative impact on staff that the high-profile takeover bid may have had.
Both Whitbread and Travelodge owner DIC have confirmed talks are over and that their focus remains on growing their respective budget hotel businesses.
By Gemma Sharkey
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