Sale of Travelodge and Little Chef to Permira Fund
18 December 2002
COMPASS GROUP PLC: SALE OF TRAVELODGE & LITTLE CHEF TO PERMIRA FUNDS
Compass Group today announces that it has conditionally agreed to sell Travelodge and Little Chef to TLLC Limited, a
company formed on behalf of funds advised by Permira, a leading international private equity firm, for a total
consideration of £712 million on a debt and cash free basis. Completion of the sale is conditional only upon
regulatory clearance from the European Commission and is expected to take place by the end of January 2003.
Background and reasons for the disposal
Travelodge is the UK's second-largest budget hotel company with over 12,000 rooms located in key roadside and urban
locations in the UK. Little Chef is the UK's leading roadside restaurant business with 368 outlets on major trunk
roads, in addition to outlets on Compass Group's Moto sites. Following a strategic review earlier this year it was
determined that the Travelodge and Little Chef businesses lie outside Compass Group's core focus on contract
foodservice, vending and selected foodservice concessions. An intention to dispose of the businesses through an
auction process was therefore announced on 28 June 2002.
Terms of the disposal
The consideration comprises cash, £10 million of which is to be deferred for a maximum of two years pending the receipt
of certain consents. The transaction is being effected primarily via a share sale, with the consideration subject to a
working capital adjustment.
Arms-length franchise arrangements will be entered into permitting Compass Group's continued use of Little Chef in the
Moto motorway service areas, as well as the purchaser's use of Harry Ramsden's in Little Chef. Following completion,
Compass Group will provide certain services to the purchaser on an ongoing basis and a Co-operation Agreement has been
agreed covering collaboration on existing sites and on potential future opportunities.
Plans for the businesses
Travelodge and Little Chef represent two of the leading brands in the UK hospitality industry. Permira intends to
develop both businesses extensively over the next few years, and has prepared a significant capital investment
programme in anticipation of this rapid expansion. In particular, new hotel openings will be accelerated in Travelodge
and the brand development programme already started by Compass Group in Little Chef will be continued.
Financial effects for Compass of the disposal and use of the proceeds
For the year ended 30 September 2002, Travelodge and Little Chef had turnover of £368 million and contributed £105
million to Compass Group's operating profit before goodwill amortisation and after depreciation of £15 million.
Capital expenditure for the year ended 30 September 2002 was £51 million and the businesses had net assets of £707
million as at 30 September 2002.
Proceeds will be used to reduce borrowings and fund an on market share buy back programme of up to £300 million. It is
not anticipated that the share buy back programme will commence before completion.
Michael J. Bailey, Chief Executive, Compass Group, commented:
'We are pleased to have successfully agreed this disposal. Travelodge and Little Chef are two great businesses, but
they do not fit with our strategic focus on contract foodservice, vending and selected foodservice concessions. We wish
the new owners and all the staff well for the future.
'We are also pleased to announce a share buy back programme, which underlines our focus on delivering shareholder
value.
'We will continue to concentrate on our strategy of focusing on the foodservice and vending markets, delivering solid
organic growth, continued margin improvement, strong free cash flow generation and improving return on capital
employed.'
Carl Parker, Permira Partner commented:
'We are delighted to acquire two brand leading businesses in one transaction. Travelodge is the most highly recognised
brand in the budget hotel sector, which is the fastest growing sector in the industry, and we look forward to playing a
part in that continued growth. Little Chef has a unique position in the roadside catering market and has a loyal
customer base, which provides a solid platform for future development. '
Ends
Enquiries
Compass
Andrew Lynch Compass Group 01932 573 000
Tim Grey / Simon Sporborg Brunswick 020 7404 5959
Permira
Amanda Shaw Permira 020 7632 1007
Edward Orlebar / Melanie Finsbury 020 7251 3801
Gerlis
Notes to Editors
1. Compass Group is the world's largest foodservice company with annual foodservice revenues in excess of £10bn.
Compass Group has over 360,000 employees working in more than 90 countries around the world providing foodservice and
hospitality. For more information visit www.compass-group.com
2. Permira is one of the largest private equity specialists in Europe. As an independent business, Permira is owned and
controlled by its partners. The firm's team of over 100, based in Frankfurt, London, Milan, Paris and New York advises
the Permira Funds with a total committed capital of €Euro 6 billion. Since 1985, the Permira Funds have completed over
250 private equity transactions. During the last three years, the Permira Funds have invested in 15 acquisitions with a
combined transaction value of over € Euro 10 billion. There are 67,000 people employed by businesses backed by the
Permira Funds.
3. Travelodge is the second largest operator in the UK budget hotel sector, providing over 12,000 rooms in 220 hotels
located on Britain's trunk road and motorway network and major city centres.
4. Little Chef is the largest roadside restaurant chain in Britain with 368 outlets on the trunk road network and 29 on
the motorway network, including 5 sites in Ireland. Every year, more than 30 million people eat at Little Chef
restaurants. Over the past twelve months, Compass Group has successfully piloted a brand development programme for
Little Chef, extending its offering through the introduction of brands including Harry Ramsden's.
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