News of the sale follows competitive bidding in which MGPE, part of Deutsche Bank, beat off rival bids from Nomura, Punch Group and a joint approach from Candover and Pubmaster.
MGPE's victory came despite attempts by Punch chairman Hugh Osmond
to derail the offer. The venture capital house had intended to work with Luke Johnson, Osmond's business partner, but he had to withdraw after it emerged that he had signed a non-compete clause as a shareholder of Punch. According to reports last week, Osmond also attempted to invoke a "non-compete" clause that Deutsche Bank is said to have signed two years ago as a shareholder in Punch. (See Punch lands surprise blow in Whitbread fight)
Whitbread said the sell-off would lead to around £1.13bn being returned to shareholders via a cash payment of 230p per share and would include a loan note alternative. The payout for shareholders is expected to be substantially completed by early June. Whitbread said it intended to retain around £445m to help it reduce borrowings.
Shareholders are expected to vote on the pubs demerger plans at an AGM on April 20, and the company's full-year results are expected to be released on May 2.
"This represents a very favourable outcome for Whitbread Holdings shareholders," said Whitbread chairman Sir John Banham. "The board has fulfilled its objectives of realising full value for the pubs and bars division and creating a focused company with leading positions in growth segments of the UK leisure market - lodging, eating out and active leisure," he said.
Stewart Miller, managing director of the pubs and bars division, will become managing director of David Lloyd Leisure once the deal is completed and he will continue to be a director of Whitbread Holdings.
The pubs and bars division includes 1,710 leased pubs, 1,095 managed pubs
and around 193 branded pubs and bars and the division generated earnings before tax and interest payments of £173.9m in the year to March 4 on turnover of £668.5m.
business will be demerged from Whitbread Holdings to Fairbar Ltd, a specially created company outside the Whitbread group and Morgan Grenfell will then acquire Fairbar for 230 pence a share via its own takeover vehicle NewCo. Whitbread then intends to change its name back to Whitbread plc.