Activist Elliott raises pressure for Whitbread break-up

[April 16, 2018]   (Reuters) - Hedge fund Elliott Advisors has become the second activist investor to call for Whitbread Plc <WTB.L> to split its hotel and coffee shop businesses after emerging as the largest shareholder in the British company.

Elliott, which holds a 6 percent stake in the FTSE 100-listed group, is pushing for it to demerge its popular Costa coffee-shop chain from the rest of the business, a source familiar with the fund's thinking told Reuters.

Whitbread https://www.whitbread.co.uk/investors shares rose 6.5 percent by 1030 GMT on Monday after Elliott disclosed the stake. Whitbread, led by Chief Executive Alison Brittain, declined to comment.

Its intervention comes nearly three months after Reuters reported that another activist investor, Sachem Head, wanted Whitbread's management to examine a breakup as a way to boost the value of its individual businesses.

The Sachem Head hedge fund holds a 3.38 percent stake in Whitbread, according to Thomson Reuters Eikon data.

Whitbread has in recent years sold off its brewing business and some pubs to focus mainly on Costa, as well as Premier iin hotels, the Beefeater restaurant brand and the Brewers Fayre pub restaurant chain.

Elliott, part of U.S. investor Paul Singer's hedge fund firm, believes splitting Whitbread into two listed entities will allow the market to value it properly, said the source.

A cup of espresso is pictured on a table at a branch of Costa Coffee near Manchester, Britain May 5, 2017. REUTERS/Phil Noble

He estimated the separate businesses would have a total market capitalization of 10 billion pounds ($14.3 billion) from around 7.2 billion pounds now, a 38 percent increase.

Unlike Sachem Head, however, Elliott does not want Premier Inn to sell its properties. Singer's hedge fund also does not want Whitbread to take on more debt, leverage or offer further share buybacks.

Investors and analysts have long raised the idea that Whitbread should spin off Costa.

"It’s always been a point of questioning as to ‘what’s the logic of having these two businesses together? Why not separate?" an investor told Reuters last month.

(Reporting by Sangameswaran S in Bengaluru and Maiya Keidan in London, additional reporting by Simon Jessop; Editing by Peter Cooney/Keith Weir)

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