Investor Corvex laments Whitbread "underperformance", demands seat

An activist investor on Tuesday demanded a vote to get a seat on the Whitbread PLC board, saying the hotel company has "materially underperformed its peers and the wider market".

Corvex Management, which owns some 7% of Whitbread, a Dunstable, England-based operator of Premier Inn and other hospitality chains, wants to install its partner James Gemmel to the board.

"Whitbread has materially underperformed its peers and the wider market over multiple time horizons and is trading at a significant discount to its peers. In Corvex's view, the board's recent strategy review failed to address Whitbread's underlying challenges and was poorly received by the market," Corvex said.

"Corvex is not seeking control of Whitbread and is not demanding a sale of the company. It is asking for a single seat on the board, to work in a collegiate and constructive manner with no predetermined agenda, to benchmark the company's current strategy against every credible alternative to establish a pathway that maximises value for all."

Corvex said that since the sale of Costa in 2018, Whitbread has deployed around £2.6 billion of growth capital expenditure while delivering "only" 3% earnings per share compound annual growth revenue, a flat dividend and a £2.3 billion increase in lease-adjusted net debt.

Corvex added: "The consequences are clear: shareholders have suffered negative total returns of approximately negative 17% over the past ten years, negative 18% over the past five years and negative 22% over the past year, materially underperforming comparable companies and relevant indices."

For the cited negative 17% return over the past 10 years, Corvex noted a 130% rise in the return for the FTSE 100 index, which Whitbread is a part of.

Corvex said: "We believe a fresh perspective is warranted. With the company committing to a further £2.5 billion of gross capital expenditure over the next five years, funded by £1.5 billion of sale-leaseback financing, a commitment of this scale requires direct shareholder representation on the board - certainly more than the around 0.04% of shares currently owned by the board. Corvex has spent fifteen years working with boards through exactly these kinds of strategic inflection points, with members of our team having served on more than a dozen public company boards, particularly across hospitality and consumer businesses."

Back in May, Corvex urged the Premier Inn owner to put itself up for sale. In a damning letter to Whitbread management, the New York-based activist hedge fund called the status quo "untenable" and said that the need to pursue "meaningful strategic and structural reform had become unignorable".

Whitbread shares were 0.9% higher at 2,348.00 pence each on Tuesday morning in London.

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