Starwood may launch a bid for Whitbread

Starwood Capital, the US private equity real estate firm that has been extremely active in the European hospitality markets, may launch a bid for UK leisure group Whitbread according to London broker Numis.

Numis says there is an “increased likelihood” of an approach after London-based private equity group Permira sold its budget hotel group Travelodge to Dubai International Capital for £675 million (€995 million; $1.2 billion).

Starwood was reported by the Financial Times as one of the losing bidders in the Travelodge auction.

“We believe that there is now an increased likelihood of a bid for Whitbread by Starwood Capital, whose interest in Whitbread was first reported on July 23 and for whom the Premier Travel Inn chain is the obvious attraction,” Numis says.

In July Starwood discussed with advisers JPMorgan the possibility of an approach to the leisure group, which has a current market capitalization of £2.7 billion.

It was among the bidders who looked at hotel and leisure company De Vere, which was eventually sold in June for £1 billion to Alternative Hotel Group Venice (AHG), a vehicle controlled by property mogul Richard Balfour-Lynn and backed by a subsidiary of the Bank of Scotland.

And earlier this year it completed a $3.2 billion deal to buy majority stakes in French companies Groupe Taittinger and Société du Louvre, giving it control of two of Paris’s most historic luxury hotels.

Numis estimates that  Whitbread’s Premier Travel Inn budget hotel chain would be worth £2.4 billion at the end of the 2007 financial year.

It also insists the market “continues to undervalue Whitbread’s freehold property portfolio” despite a recent asset disposal process.

As well as Premier Inn, Whitbread operates Brewers Fayre, Beefeater, Costa Coffee, T.G.I. Friday’s and David Lloyd Leisure.

The link between Starwood and Whitbread comes as research shows private equity firms piled into European hotels in 2005.

They accounted for 41 percent of the €20.6 billion ($26.2 billion) worth of European hotels bought and sold in 2005, compared to just one percent in 2000, according to Jones Lang LaSalle Hotels.

Morgan Stanley, Blackstone and Lehman Brothers have also been involved in some of the largest deals.

Last year, for example, Lehman Brothers, the investment arm of the Government and Realstar bought 73 UK hotels from InterContinental Hotels Group in a €1.4 billion deal.