Investor puts pressure on Whitbread

LONDON – Activist investor and New York-based hedge fund Corvex Management has asked Whitbread, owner of the 800-unit strong economy hotel brand Premier Inn, to review its strategic direction and potential five-year, $4.7 billion capital plan, citing a gap in valuation and ongoing concerns about increasing operating costs.

“Following the recently announced U.K. budget and changes to rateable values and business rates, we believe the company should undertake a strategic review to assess its capital allocation priorities and overall strategic direction,” the fund said in a statement.

Corvex, with a reported 6% stake in Whitbread, further stated in a news release that the potential capital plan approaches the company’s current market cap.

Whitbread has suffered from higher costs this year related to labor and food costs and is expected to face further pressure as changes to the way business rates are calculated come into effect next year. The company warned last month that new budget measures, including an increase in taxes for high-value commercial real estate, would add £ 40- £ 50 million in costs next fiscal year, putting profit margins under further pressure.

Corvex also said it would seek board seats to push for an evaluation that would consider a “full range of options” with independent advisors.

The hedge fund also said Whitbread's current share price appeared to assign no value to several components of the business, including its U.K. leasehold portfolio, German hotel assets and properties under construction.

In response, Whitbread has stated, “Our five-year plan is designed to deliver strong returns for shareholders through growth in both the U.K. and Germany.”