British leisure group Whitbread Plc said yesterday it hopes to raise up to £1 billion by selling its Marriott luxury hotels chain through a joint venture with the brand's owner.
Whitbread said it was creating a 50:50 joint venture with Marriott International to hold the luxury hotels until they are sold, and would receive an initial payment of £710 million on May 5.
The London-based company said 400 million of that would be returned to shareholders through a special dividend of 135 pence per share, another 100 million would be used to reduce its pension fund deficit and the rest to repay debt.
"We expect the joint venture to sell the properties within two years because we want to achieve maximum value and benefit from the current appetite for hotel property assets and the continued upturn in the hotel cycle," Whitbread Chief Executive Alan Parker told reporters in a conference call.
A source close to the process, however, said it was likely that Whitbread would announce a sale of some or all of the hotels on May 5, when it completes the deal.
"They don't want to sell the portfolio to one person. They'd like to have two tranches," the source said, adding the country clubs would likely be sold separately from the city hotels.
The source said Whitbread already had a number of potential buyers lined up including US buyout giant The Blackstone Group, which runs a property fund and Whitehall, a property fund run by Goldman Sachs. Other contenders were London & Regional Properties and US billionaire financier George Soros.
"If, when they announce completion on May 5, at the same time they can also say they've sold a big part of the business for over book value then that's a good thing."
Marriott said it will retain management control over the hotels after the sale.
It also said the joint venture and related transactions would boost its earnings per share after tax modestly in 2005 and in 2006, although it gave no precise details.
Under the terms of the deal, Whitbread will sell 46 of its 51 four-star hotels, almost all in the UK and Marriott-branded, to the joint venture, with 8,300 staff transferring in the process.
When the sales of the hotels are announced, Whitbread with receive another 290 million - bringing the total to a billion. Thereafter it will split any additional profit 50:50 with Marriott, the source said. Exiting the luxury hotel business follows a strategic review unveiled last October and allows Whitbread to focus on its Premier Travel Inn budget hotels, David Lloyd health clubs and restaurant chains.