UPDATE: Mitchells & Butlers In Hotel Sale Deal With Travelodge

15th Jul 2010 13:03

(Adds detail, comment from Travelodge) Michael Carolan Of DOW JONES NEWSWIRES LONDON (Dow Jones)--U.K. pub group Mitchells & Butlers PLC (MAB.LN) Thursday took the first major step in its new management's business strategy, selling its 52 hotels for GBP91 million, with budget hotel operator Travelodge taking on the leases in a 25-year deal. The U.K. pub group said it was selling the Inkeeper's Lodges, which comprise 2,000 rooms, to Prupim, a property investment arm of Prudential PLC (PUK). Prupim in turn has agreed to lease the hotels for 25 years to Travelodge, the budget hotel chain owned by Dubai Holding's investment arm. The deal is the first under M&B's new strategy of selling non-core assets to focus on expanding its key brands. New Chairman John Lovering unveiled his new strategy for the company in March. He plans to sell up to 15% of the group's estate as he accelerates M&B's move away from traditional drink-led pubs towards those offering a full food service, such as the Harvester and Toby Carvery chains. The net proceeds will be used to cut debt and fund capital investments. M&B will also make a one-off initial contribution of GBP3 million to the rental charge for the hotels. Travelodge will spend GBP10 million converting the hotels to its brand over the next four months "This innovative deal represents the whole of last year's growth in one move," said Grant Hearn, Travelodge's executive chairman. "We hope to explore further opportunities like this deal with other similar businesses," he added. All of the hotels are adjacent to Mitchells & Butlers' restaurants and pubs. As part of the deal, Prupim is buying eight of M&B's pubs, which are inseparable from the hotels, and leasing them back to M&B for 25 years. Travelodge's new CEO Guy Parsons told Dow Jones Newswires last month there was a large opportunity to operate hotels alongside pubs. It has already built a number of hotels alongside pubs of Marston's PLC (MARS.LN). This deal will raise Travelodge's estate to 452 hotels. The hotel operator said it would seek to retain all 430 staff from M&B and recruit a further 115 staff. Hearn stepped up from Travelodge's CEO to his new role on July 1 in order "focus on the company's growth opportunities." Travelodge is aiming to double its number of rooms in the U.K. to 70,000 over the next 10 years. It is already opening 26 hotels this year. The 52 hotels generated profit of GBP9.5 million in the year to September 2009. -By Michael Carolan, Dow Jones Newswires; 44-20-7842-9278; [email protected] (END) Dow Jones Newswires July 15, 2010 08:03 ET (12:03 GMT)