Looking beyond the deal

It was a good end to the week for deals – even if buyers may have had to bid more than they had wanted to. The management buy-out at Yates, in question up until Friday, now looks a formality after GI Partners, the US private equity house backing the deal, raised its bid by 5% from 140p a share to 147p to satisfy disgruntled Yates family shareholders. Friday also saw Whitbread pulling off the purchase of 132 Premier Lodge budget hotels and 13 pub restaurants from Spirit Group for a grand total of £535m. As this column suggested some weeks, it was a deal whose fate always looked like being in Whitbread’s own hands. It all depended on how much Whitbread’s new chief executive Alan Parker wanted it. In the end, insiders suggest Whitbread bit a considerable amount more than the only other player left in the auction, the private equity house Apax. Parker has already responded to accusations of overpaying, insisting it will be seen as a "good deal", but at over £50,000 a room it is a price his predecessor David Thomas had hinted he would not have paid. But Parker as made his first, and very positive, move as the new boss, and as with the Yates deal, it is what happens now that is of most interest. Already City analysts are busy speculating on potential sell-offs and restructuring in the Whitbread camp. Will it now sell its high street restaurants, or its pub restaurants or its stake in Britvic? Disposing of the pub restaurant business seems unlikely at the moment, especially as it has just acquired 13 sites, to become Brewers Fayre, as part of the Premier Lodge purchase. But a rationalisation of that division does look on the cards, especially following the recent departure of Brewers Fayre managing director Neil Webster. However, we will probably have to wait until the autumn when Parker has concluded his strategic review to find out. What is of more importance now is how Whitbread goes about the integration of its new acquisition. It has already said the new business will be called Premier Travel Inn, supposedly to help differentiate it from competitors. However, it does suggest that this could be a real merger rather than just as Travel Inn takeover. It will be interesting to see if Parker takes on some of Premier Lodge’s management talent to help refresh and strengthen his Travel Inn team? But perhaps the most intriguing element will be Whitbread’s ongoing relationship with Spirit Group. It will have to develop a close working relationship on those sites that it will share with continuing Spirit pub businesses. Until now they will have been run by a single management team. In futyre, presumably, there will be two distinct teams. Whitbread and Spirit have an existing joint-venture involving Travel Inn, so both know the issues. If the arrangements work well, it could lead to Whitbread looking to more partnership deals with other UK pub restaurant owners, such as regional brewers, or even with European restaurant or foodservice providers. The success of the integration process will be as important as any restructuring in judging Whitbread’s ability to continue to grow its business in the next few years. It is a similar situation at Yates Group, if on a smaller scale. Pulling off the mbo is probably only the start. GIP has made no secret of its ambitions to consolidate within the high street pub market – and Laurel’s remaining high street estate, or at least the best parts of it, would appear to be its next target.