Shares in Premier Inn owner Whitbread (WTB) have dropped 3.4% to £47.34 as it announces it will return around £2bn to shareholders at a price of £49.72 per share.
The tender offer is a way of returning some of the proceeds from Whitbread’s £3.9bn sale of Costa Coffee to Coca-Cola earlier this year.
Including a £482m share buyback earlier this year, Whitbread has returned just under £2.5bn to shareholders in total following the sale.
The purchasing of the shares back from shareholders – approximately 40m of them, equating to around 23% of the current outstanding share base – also means the number of shares outstanding has narrowed significantly.
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Shareholders taking part in the tender offer didn’t know the exact price at which their shares would be bought until today, when Whitbread determined a final strike price based on between a 0% and 5% premium to the volume-weighted average price over the five days to 19 July, capped at no higher than £50.
Following the tender offer, which was oversubscribed, all shares offered back to the company at or below the strike price will be accepted, but offers above the strike price will be rejected.
The tender offer will become unconditional at 7am tomorrow, and money will be paid back to shareholders via cheques or as a Bacs payment on 30 July.
Shareholders who hold uncertificated shares will be credited to their CREST accounts, again on 30 July.
Shore Capital analyst Greg Johnson says now Whitbread’s share price isn’t being propped up by the tender offer, its shares could fall to the low £40s given that its ‘recent trading backdrop has been soft’.
Johnson added there is a risk Whitbread’s results this year could end up below what it has forecasted.
But longer term, Johnson sees a share price around £53 as fair value given Whitbread is the leading UK hotel operator – almost one in every seven UK hotel nights is spent in a Premier Inn – and has a good number of property assets on its balance sheet, as well as limited debt.