Move for Whitbread from Starwood Capital could trigger bidding war

Any move by cash-rich, acquisition-hungry private equity buyers to snap up all or part of hotels, pubs and coffee bar conglomerate Whitbread is likely to lead to a bidding war, City analysts predicted this week.

Rumour and speculation swirled around the Premier Travel Inn, Brewers Fayre, Beefeater, TGI Friday's and Costa Coffee owner after it emerged a US property investor, Starwood Capital, had bought a near-3% stake in the company.

The move puts Starwood's stake just shy of the limit at which it would be obliged to declare its interest to the London Stock Market.

"What we have at the moment is that a lot of private equity houses have a huge amount of cash out there and are all chasing not too many deals," said one analyst, who declined to be named.

"So they are revisiting some businesses and perhaps taking a look at them with a fresh perspective. But if a bid were to be forthcoming at any point I think we would also see competing bids coming out," he added.

One of the difficulties is that all the Whitbread businesses are relatively attractive targets, making it hard to see who might put themselves forward, City observers said.

The pubs are well valued, Premier Travel Inn has built a good reputation and Costa Coffee would be a good fit with many companies.

Whitbread's David Lloyd Leisure health and fitness clubs could also be tempting to an appropriate buyer.

Other analysts suggested the company was a prime target for demerger, although they pointed to the fact that the current management is generally considered to be doing a good job.

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By Nic Paton

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