Issue of Equity

Peel Hotels PLC
7 November 2001



                                 PEEL HOTELS PLC


          3 FOR 25 PLACING AND OPEN OFFER AT 87P TO RAISE £3 MILLION

          WAIVER OF MANDATORY OFFER REQUIREMENTS UNDER THE CITY CODE



1.            Introduction



Peel Hotels plc (the 'Company') intends to raise £3 million (£2.8 million net
of expenses) through a placing and open offer (the 'Placing and Open Offer')
by Peel Hunt plc ('Peel Hunt') of 3,453,791 new ordinary shares in the Company
('Ordinary Shares') at 87p per share.  The Placing and Open Offer is intended
to help fund the acquisition of further hotels and to provide the Company with
additional working capital.



Of the gross proceeds of the Placing and Open Offer, £1.05 million is being
raised from each of Robert Peel and his brother, Charles Peel, through a firm
placing of new Ordinary Shares. The remainder of the gross proceeds are
available for subscription by shareholders in the Company on the register of
members on 1 November 2001 ('Qualifying Shareholders') under the open offer
element (the 'Open Offer') of the Placing and Open Offer. The Open Offer has
been underwritten by Peel Hunt. The Panel on Takeovers and Mergers (the '
Takeover Panel') has ruled that in respect of the Open Offer, Robert Peel and
Charles Peel together constitute a concert party (the 'Concert Party'). The
subscriptions of the Concert Party will result in its interest in the Ordinary
Shares and rights over Ordinary Shares rising from 43.83 per cent. to 50.69
per cent. (taking account of options that Robert Peel could exercise over
1,000,000 Ordinary Shares). Under Rule 9 of the City Code on Takeovers and
Mergers (the 'City Code'), this increase in the Concert Party's aggregate
interest would normally oblige it to make a general offer to all Shareholders
to acquire their Ordinary Shares. However, in this instance, the Takeover
Panel has agreed to waive any such obligation if Shareholders (other than the
Concert Party) approve such waiver on a poll at an extraordinary general
meeting convened for 26 November 2001, a notice regarding which is being
posted to Shareholders today. Without such approval from Shareholders, the
Placing and Open Offer cannot proceed.  If the waiver is approved by
Shareholders, the City Code shall not prohibit the Concert Party from
acquiring further Ordinary Shares in the market, following the Placing, with
the result that potentially its interest could increase to a maximum of 70.01
per cent. without triggering any obligation to make a general offer to all
Shareholders.



2.            Reasons for the Placing and Open Offer



The Company's strategy is to build an hotels business in the UK by identifying
opportunities where value can be added and superior shareholder returns can be
achieved.  By applying the criteria of location, quality, value for price and
the current and continuing needs of the market, the Company actively seeks out
ownership and management opportunities within the hotel and catering sector.



The Company is currently negotiating to acquire two further hotels which, in
the opinion of the Concert Party and the other directors in the Company (the '
Independent Directors'), meet the above strategic criteria.  The net proceeds
of the Placing and Open Offer will provide the equity element of the purchase
consideration for the two hotels, should an acquisition be completed.



3.         Details of the Placing and Open Offer



The Placing and Open Offer is intended to raise £3 million (£2.8 million net
of expenses) by the issue of 3,453,791 new Ordinary Shares, of which 2,413,792
Ordinary Shares will be placed firm with Robert and Charles Peel and 1,039,999
will be placed subject to the rights of Qualifying Shareholders to apply for
such shares under the Open Offer.  Qualifying Shareholders will be given the
opportunity to subscribe 1,039,999 new Ordinary Shares under the Open Offer at
a price of 87p per share, payable in full on application, up to a maximum
entitlement calculated on the following basis:



              3 new Ordinary Share for every 25 Ordinary Shares



and so in proportion for any other number of Ordinary Shares held on 1
November 2001.  Qualifying Shareholders may apply for any whole number of new
Ordinary Shares up to their maximum entitlement.  Entitlements to new Ordinary
Shares will be rounded down to the nearest whole number of shares.  The
fractional entitlements which would otherwise have arisen will not be allotted
to Qualifying Shareholders but will be aggregated and subscribed by placees or
Peel Hunt for the benefit of the Company.



The new Ordinary Shares will be allotted credited as fully paid and will rank
pari passu in all respects with the existing Ordinary Shares, including the
right to receive all dividends and other distributions declared, made or paid
after the date of their issue.



The Placing and Open Offer is conditional, inter alia, on the passing of the
resolution to be proposed at the extraordinary general meeting referred to
above, the placing agreement entered into between the Company and Peel Hunt
becoming unconditional in all respects and not having been terminated in
accordance with its terms prior to the admission of the new Ordinary Shares to
AIM and on such admission becoming effective.



Of the new Ordinary Shares, 2,413,792 (representing 69.89 per cent. of the new
Ordinary Shares) have been placed firm with Robert Peel and Charles Peel.



Robert Peel has undertaken to the Company not to take up his entitlement under
the Open Offer to 366,666 new Ordinary Shares and John Govett has undertaken
to the Company not to take up 8,000 new Ordinary Shares out of his entitlement
under the Open Offer to 33,000 new Ordinary Shares.  These entitlements
represent approximately 36.03 per cent. of the new Ordinary Shares to which
the Open Offer relates.  Peel Hunt has agreed to place such shares firm with
investors.



Norbert Petersen intends to take up his entitlement under the Open Offer to
26,799 new Ordinary Shares in full and John Govett intends to take up 25,000
new Ordinary Shares out of his entitlement under the Open Offer to 33,000 new
Ordinary Shares.  These entitlements represent approximately 4.98 per cent. of
the new Ordinary Shares to which the Open Offer relates. Peel Hunt has agreed
to place the remaining 613,534 new Ordinary Shares (representing approximately
58.99 per cent. of the new Ordinary Shares to which the Open Offer relates)
with investors subject to clawback to satisfy valid applications under the
Open Offer.



The Open Offer closes at 3.00 p.m. on 28 November 2001. Peel Hunt has agreed
to subscribe any new Ordinary Shares the subject of the Open Offer which are
not taken up under that offer or subscribed by placees.



4.         City Code



Pursuant to Rule 9 of the City Code, when any person, or group of persons
acting in concert, acquires shares or rights over shares which, when taken
together with shares or rights over shares already held by such person or
persons, carry 30 per cent. of more of the voting rights of a company which is
subject to the City Code, such person or persons, except with the consent of
the Takeover Panel, is or are required to make a general offer to all
shareholders in that company to acquire their shares.



Further, when any person, or group of persons acting in concert, holds shares
or rights over shares which carry between 30 per cent. and 50 per cent. of the
voting rights of a company which is subject to the City Code, such person or
persons, except with the consent of the Takeover Panel, may not normally
acquire further shares or rights over shares without making a general offer to
all shareholders in that company to acquire their shares.



Any person, or group of persons acting in concert, holding shares or rights
over shares which carry more than 50 per cent. of the voting rights of a
company which is subject to the City Code, is free to acquire further shares
or rights over shares without making a general offer to all shareholders in
that company to acquire their shares. However, where a group of persons acting
in concert holding shares or rights over shares which carry more than 50 per
cent. of the voting rights of such a company includes persons who individually
hold shares or rights over shares which carry 50 per cent. or less of the
voting rights of such company, the above restrictions apply to such persons
individually, notwithstanding the holding of the concert party overall.



As stated above, 1,206,896 of the new Ordinary Shares (representing 34.94 per
cent. of the new Ordinary Shares) have been placed firm with each of Robert
Peel and with his brother, Charles Peel. The Takeover Panel has ruled that in
respect of the Open Offer, Robert Peel and Charles Peel together constitute a
concert party... Robert Peel's current shareholding in the Company equates to
35.26 per cent. of the voting rights.  In addition, he has options to
subscribe a further 1,000,000 Ordinary Shares the exercise of which has
already been approved by the Company's shareholders under the Rule 9 waiver
provisions of the City Code. The exercise of these options would give him a
shareholding equivalent to 41.95 per cent of the voting rights.  Charles
Peel's current shareholding in the Company equates to 2.1 per cent. of the
voting rights and would equate to 1.88 per cent. of the voting rights were
Robert Peel to exercise the options referred to above. The Concert Party's
aggregate current interest in Ordinary Shares and rights to acquire Ordinary
Shares equates to 43.83 per cent. of the voting rights attaching to such
shares and rights to acquire shares.



Following completion of the Placing and Open Offer, and on the basis that
Robert Peel's options are exercised, Robert Peel's interest in the voting
rights of the Company would fall from 41.95 per cent. to 40.11 per cent.
Charles Peel's participation in the Placing and Open Offer would result in his
shareholding rising from 1.88 per cent. to 10.58 per cent. of the voting
rights. The Concert Party's interest in the Company's voting rights would rise
from 43.83 per cent. to 50.69 per cent. The increase in the Concert Party's
aggregate interest in the Company's voting rights would normally oblige it to
make a general offer to all shareholders in the Company to acquire their
Ordinary Shares. However, in this instance, the Takeover Panel has agreed to
waive this obligation if the resolution to be proposed at the extraordinary
general meeting referred to above is passed by the Company's shareholders on a
poll. To be passed, the resolution will require the approval of a simple
majority of votes cast on that poll. Robert Peel and Charles Peel will not be
voting on the resolution in respect of their Ordinary Shares.



Since, following completion of the Placing and Open Offer, the Concert Party
will hold Ordinary Shares and rights over Ordinary Shares equivalent to 50.69
per cent. of the voting rights of the Company, it would be free to acquire
further Ordinary Shares in the Company without being obliged to make a general
offer to all Shareholders to acquire their Ordinary Shares so long as no
individual member of the Concert Party becomes obliged to make such a general
offer by, in Robert Peel's case, acquiring further Ordinary Shares, or, in
Charles Peel's case, acquiring further Ordinary Shares equivalent to a
shareholding representing 30 per cent or more of the voting rights.



5.            Related parties and Board deliberations



Robert Peel's subscription for new Ordinary Shares constitutes a related party
transaction under the AIM Rules.  The Independent Directors are of the
opinion, having consulted Peel Hunt, the Company's Nominated Adviser, that the
terms of Robert Peel's subscription are fair and reasonable so far as
shareholders in the Company are concerned.



In addition, Robert Peel has taken no part in the board's deliberations
relating to the waiver of the requirement to make a mandatory offer under the
City Code and he and Charles Peel have undertaken not to vote at the
extraordinary general meeting in respect of their beneficial holdings of
Ordinary Shares.







                    EXPECTED TIMETABLE OF PRINCIPAL EVENTS


Record date for the Open Offer                                  1 November 2001

Despatch of application forms                                   7 November 2001

Extraordinary General Meeting                                    11.00 a.m., 26
                                                                  November 2001

Latest time for splitting application forms (to                   3.00 p.m., 26
satisfy bona fide market claims only)                             November 2001

Latest time for receipt of completed application forms            3.00 p.m., 28
and payment in full                                               November 2001

Dealings to commence in the new Ordinary Shares                 3 December 2001

Crediting of CREST accounts                                     3 December 2001

Share certificates in respect of new Ordinary Shares            5 December 2001
despatched by





Application forms in relation to the Open Offer are personal to Qualifying
Shareholders and may not be transferred except to satisfy bona fide market
claims.