Premier Inn owner Whitbread affirms turnaround plan, urges rejection of Corvex seat

By Yamini Kalia

Oct 13 (Reuters) - Premier Inn owner Whitbread on Tuesday reaffirmed its commitment to a five-year turnaround plan and recommended shareholders reject activist investor Corvex Management's demand for a board seat.

Britain's largest hotel operator is defending a strategy that includes job cuts and the closure of branded restaurants against Corvex, which dropped a push for an outright sale last month before escalating its campaign for change by demanding a board seat. 

"(Corvex) appear to be changing their mind quite regularly and it's actually hard to understand what they're really asking for," Whitbread CEO Dominic Paul told Reuters, adding that Corvex had not explained why it withdrew its request for a sale.

"Great businesses are run with a clear plan and a strong focus on execution and we think that giving (Corvex) a board seat would risk that," Paul said.

Shares in the FTSE 100 firm were up 2.2% at 2,562 pence by 1306 GMT.

James Gemmel, the Corvex partner nominated for Whitbread's board, said: "We’re encouraged to see RevPAR (Revenue Per Available Room) strength across the portfolio, but today’s results don’t change our core concerns."

HOSPITALITY SECTOR NERVOUS ABOUT POSSIBILITY OF TAX RISE

In April, Paul unveiled plans to shut 197 remaining branded restaurants, sell £1.5 billion ($2.0 billion) of freehold property and cut about 3,800 jobs, pivoting Whitbread toward a higher-margin, pure-play hotel model.

The strategy came in response to last year's UK budget, which raised business rates, labour costs and wages for the hospitality sector. The industry was then hit by another wave of cost pressures as energy prices surged following the Iran war.

Paul urged the UK government to freeze hotel business rates in its forthcoming budget, warning that the current trajectory of tax increases was curbing investment and job creation in the sector.

Whitbread beat first-half adjusted pre-tax profit expectations and reaffirmed its full year outlook, as strong hotel trading in Britain and Germany offset cost inflation and the disruption of exiting its branded restaurant business.

In the five weeks to October 1, UK accommodation sales rose 4.5%, while Germany sales climbed 31.2%.

Analysts at Peel Hunt welcomed the results but cautioned that further government tax increases could erode the value created by Whitbread's turnaround.

A general meeting to consider Corvex's request will be held on November 9. ($1 = 0.7553 pounds)

(Reporting by Yamini Kalia in Bengaluru; Editing by Jochelle Mendonca and Louise Heavens)