Whitbread disposal of Marriott hotels

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• Whitbread disposal of Marriott hotels

14th March 2005
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Alan Parker

• Chief Executive

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Strategic framework

• October 2004 Following business review,
  Whitbread sets out three strategic principles
• Invest in businesses capable of generating
  significant growth and economic profit
• Release capital from under-performing and
  non-core businesses
• Return surplus cash to shareholders

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Todays announcement (subject to shareholder
approval)

• Whitbread to exit operation and ownership of
  Marriott hotels
• At least 1bn expected to be realised by
  Whitbread within two years
• Significant return of cash to Whitbread
  shareholders
• Exit improves Whitbreads return on capital
• Return of cash enhances Whitbreads earnings per
  share

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The transaction

• Whitbread and Marriott International establish
  50/50 joint venture to hold hotel properties
  until sold
• Whitbread receives initial consideration of 710m
  cash
• Marriott International to operate hotels under
  long-term management contracts
• Total Whitbread realisation expected to exceed
  1bn within two years as joint venture sells
  hotel properties

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A complete exit

• Creates more value realises more capital in
  shorter timeframe
• Marriott Internationals management of hotels
  enhances asset values
• Elimination of franchise fee
• Cost synergies with Marriott International

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Distribution of initial proceeds

• 710m realised upon completion of transaction
• 400m return of cash to Whitbread shareholders
• 100m reduction of Whitbread pension deficit
• Balance to repay Whitbread debt

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Mechanics of capital return

• 400m to be returned via special dividend
• 135 pence per share
• Approximately 14 of market capitalisation
• Share consolidation to maintain comparability

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Transaction schedule(subject to confirmation)

• Circular sent to shareholders by 31 March 2005
• Extraordinary shareholders meeting 22 April 2005
• Sale to joint venture completes 5 May 2005
• Special dividend payment by June 2005

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Points of note

• Deadlocked joint venture - no intention to
  consolidate by either Whitbread or Marriott
• Goodwill expect to recover as part of proceeds
• 8 Whitbread Hotel Company properties with 75m
  NBV to be retained pending disposal

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Foundations for the future

• July 2004
• 505m acquisition of Premier Lodge
• October 2004
• Business review announced
• November 2004
• 79m disposal of Courtyard by Marriott hotels
• March 2005
• Premier Travel Inn integration completes,
  creating UKs largest hotels business
• Decision to exit Marriott and return 400m to
  shareholders
• April 2005
• Arrival of Chris Rogers as finance director
  completes new management team line-up

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Further release of capital

• At least 290m to come from joint venture asset
  sales
• Additional c.300m to be realised from non-core
  and underperforming assets
• Whitbread Hotel Company retained assets
• German restaurants
• Pub restaurants tail
• Britvic (23.75 holding)

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Whitbread 2005Capital focus (net assets by
sector)
FY 2003/4m
2004/5 m
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Whitbread 2005

• Leading positions in three growth sectors of the
  hospitality market
• Budget hotels
• Restaurants
• Health fitness clubs
• Disciplined approach to expansion
• Opportunity for greater synergies
• Sustained creation of economic profit

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• QA

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appendix
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Joint venture assets

• 46 hotels
• 6 London
• 31 provincial
• 9 Marriott Hotel Country Clubs
• 8,102 bedrooms

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Joint venture assets (46 hotels)
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Whitbread Hotel Company retained assets

• 8 properties
• 75m net book value
• Assets retained pending disposal

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Operation of the joint venture

• Joint venture board comprises six members three
  nominated by Whitbread three nominated by
  Marriott International
• Joint venture to operate Disposal Steering
  Committee responsible for asset sales. Committee
  comprised of two Whitbread representatives and
  two Marriott International representatives
• Marriott International to provide management
  services to the joint venture
• Exit mechanisms ensure dissolution of joint
  venture