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Whitbread disposal of Marriott hotels 14th March 2005

Alan Parker: 

Alan Parker Chief Executive

Strategic framework: 

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

Today’s announcement (subject to shareholder approval): 

Today’s 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 Whitbread’s return on capital Return of cash enhances Whitbread’s earnings per share

The transaction: 

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

A complete exit: 

A complete exit Creates more value & realises more capital in shorter timeframe Marriott International’s management of hotels enhances asset values Elimination of franchise fee Cost synergies with Marriott International

Distribution of initial proceeds: 

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

Mechanics of capital return: 

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

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 Transaction schedule (subject to confirmation)

Points of note: 

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

Foundations for the future: 

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 UK’s 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

Further release of capital: 

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)

Whitbread 2005 Capital focus (net assets by sector) : 

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

Whitbread 2005: 

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





Joint venture assets: 

Joint venture assets 46 hotels 6 London 31 provincial 9 Marriott Hotel & Country Clubs 8,102 bedrooms

Joint venture assets (46 hotels): 

Joint venture assets (46 hotels)

Whitbread Hotel Company – retained assets: 

Whitbread Hotel Company – retained assets 8 properties £75m net book value Assets retained pending disposal

Operation of the joint venture: 

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

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