Permira to buy Travelodge and Little Chef?

The buyout firm is reported to have entered exclusive negotiations to buy the two businesses from Compass Group.

Reports today suggest that UK-headquartered private equity firm Permira is now the front runner to buy the Travelodge and Little Chef chains from global catering business, the Compass Group.

According to The Times, Permira has now entered exclusive negotiations with Compass with sources suggesting that the price range for the acquisition is in the £750m – £800m range. This is a marked premium to original analyst estimates that valued the business at around £650m, although in line with what Compass was hoping to realise from the sale. 

Canadian bank, CIBC, its London team proving increasingly active debt providers for buyout transactions, are working with Permira on the bid and the private equity firm is said to be considering a number of financing options including securitisation and a sale and leaseback of the assets.

As reported last month on PEO, UK buyout firm Apax Partners was tipped as one of the leading candidates to acquire the two businesses. Schroder Salomon Smith Barney, handling the auction on behalf of Compass, had selected a list of five bidders, which included three financial buyers. Also bidding for the businesses was Punch Taverns' founder Hugh Osmond, who teamed up with Alan McIntosh via his new investment vehicle Sun Capital.

Travelodge and Little Chef reported profits of about £100m on sales of £320m last year. The sale will complete a series of disposals by Compass as it looks to focus on its core catering businesses. Last year it sold the Le Meridien hotel business to Nomura International’s Principal Finance group in a £1.9bn transaction. The sale of Travelodge and Little Chef is expected to complete before the end of 2002.