The opportunity to buy Whitbread “on the cheap”, has passed, the group's chief executive, Alan Parker, has told the Financial Times in an interview.
Parker told the newspaper that private equity had missed its opportunity to wrest control of the leisure group over the past few years at a relatively low price, and questioned whether the private equity sector's short-term approach gave it the necessary vision to unlock strategic value.
With rumours of a possible bid for Whitbread by Starwood Capital currently circulating again, Parker said the time to buy the company was a few years ago, when the share price was at 500p. With each share now worth more some 1950p, the chance of a bargain has diminished.
Parker said the credit for creating this shareholder value rested with himself and his management team, who have initiated a programme of disposals, including the group's Marriott Hotels portfolio, TGI Fridays, and stakes in Britvic and Pizza Hut, which culminates in next month's £925m sale of David Lloyd Leisure, the health club chain.
With £750m already returned to shareholders this year, and more set to be released, Parker was bullish about the company's future. “Why should private equity have that advantage and opportunity to create value, when we can do that for existing shareholders?” he said. “The advantage private equity has is it can take a business and move it out of the spotlight. We have to communicate quarterly trading statements and everything that can imply, whereas private equity can take it over for two to three years.”
However, Parker said listed firms had certain advantages, including the ability to build a long-term culture, and a well-groomed management team.
Whitbread will now focus on growth in emerging markets, particularly China and India, he added. “The party is only just starting there. We want to have a leading position in these economies in the developing world.”
Parker plans to grow the company organically, but he is interested in 'bolt-on' acquisitions both domestically and overseas, although he said opportunities were “limited”. Other strategies could include introducing a food offering to Costa Coffee, or segmenting the hotel business into the sub-budget market currently occupied by Yotel! and easyHotels, but he stressed no such plans were yet underway.
Parker also echoed the recent sentiments expressed by Grant Hearn, chief executive of rival hotel group Travelodge, that the budget sector was under-supplied, particularly in London. Whitbread plans to build new hotels over the next five years, under its new Premier Inn brand.
“There is a lot of old stock out there – underdemolished, undercompetitive, and overpriced. That gives us the opportunity of building up a value for money hotel budget business. I don't see any sign of that tailing off.”
