Spirit Group sells hotel chain for £536.2m

The private equity-backed pub operator has sold 141 hotels to leisure group Whitbread, which beat off competition from Apax Partners to secure the deal.

The Spirit Group, whose shareholders include Texas Pacific Group and The Blackstone Group, as well as CVC Capital Partners and Merrill Lynch Global Private Equity, has sold the Premier Lodge hotel chain to Whitbread Group for £536.2 million (€807.2 million; $988.3 million).

The Premier Lodge chain was acquired by Spirit Group as part of the £2.51 billion acquisition by the private equity consortium of the Scottish & Newcastle retail business in October 2003. Proceeds from the sale will be used to reduce borrowings.

A strategic review resulted in a decision to dispose of the hotel division to focus on the group’s 2,400 pub and restaurant chain, which is the largest managed pub operation in the UK.

The decision to sell the hotel chain attracted significant interest from trade and private equity buyers. Global buyout house Apax Partners was defeated in the final round of bidding, when Whitbread upped its offer for the group.

Whitbread is paying £505 million for 141 hotels, nine of which are currently under development, and £31.2 million for 19 adjoining pub restaurants. Following the acquisition, Whitbread will become the largest hotel operator in the UK, building on its existing Travel Inn brand.

Merrill Lynch and Bear Stearns acted as advisers to The Spirit Group.