Whitbread (LON:WTB) is scheduled to post its preliminary results on April 25, amid renewed break-up pressure after it emerged that activist investor Elliott Management had amassed a six-percent stake in the company, and was pushing for a break-up of the Costa Coffee and Premier Inn owner. Analysts meanwhile see value in the potential break-up of the company.
Elliott confirmed earlier this month that it holds a near six-percent stake in the FTSE 100 group, with the news sending Whitbread’s share price soaring, about three months after it emerged that Sachem Head, another activist investor, wanted the FTSE 100 group’s management to examine a break-up as a way to boost the value of its individual businesses.
Credit Suisse sees 26% potential upside
WebFG reported last week that analysts at Credit Suisse see a 26-percent potential upside to 4,950p for Whitbread, with the addition of Elliott as the group’s largest shareholder set to “increase the likelihood of break-up”. The broker argues that there is “much wider shareholder support for change” and that a split of Premier Inn and Costa ‘makes sense,’ with the current price ‘inconsistent’ with the long term competitive advantages of each business and a sum-of-the-parts valuation that implies 40-percent potential upside
Morgan Stanley weighs in on demerger prospects
The newswire further quoted Morgan Stanley as commenting that while the reported push for a Costa demerger is ‘likely leading to further speculation’ that ‘should support the shares’. The analysts further argue that a demerger of the Costa Coffee “could remove the risk the business is sold too cheaply” and seemed lower risk versus a disposal of Premier Inn.
WebFG News further reports that Deutsche Bank sees Whitbread as ‘one of the cheapest stocks’ in the sector on a rating of circa 14.5 times earnings, even before the emergence of Elliott.