Premier Inn owner Whitbread has successfully repelled pressure from activist investor Corvex Asset Management after shareholders rejected its attempt to secure a board seat for one of its directors, James Gemmel.
More than 83 per cent of votes were cast against the proposal to appoint Gemmel to the group's board at a general meeting held on Monday, according to City AM.
Decisive outcome welcomed
The FTSE 100 hospitality company welcomed the "decisive" outcome and stated it would now accelerate efforts to deliver on its transformation strategy, which has seen the group offload all of its restaurant operations as it aims to return £2bn to investors.
Corvex, amongst Whitbread's largest shareholders, had been campaigning for Gemmel to join the board in order to prevent what it described as the firm's "chronic misallocation of capital". The investment firm had taken particular issue with the hotel operator's £1.1bn expansion into Germany and had been demanding a "rigorous, fact-based review" of the company's capital deployment.
Market reaction and chair's response
Shares in Whitbread dropped 1.9 per cent to 2,774p immediately after the announcement, although the stock has risen approximately 19 per cent over the past six months.
Christine Hodgson, Whitbread's chair, expressed gratitude to the "overwhelming majority" of the company's shareholders for voting "decisively" in line with its board. She said: "We will now continue to focus on delivering our Five-Year plan, which has clear and measurable milestones to drive significant value for shareholders, and which we are already executing at pace."
She added: "With this plan, we are on course to deliver a step change in margins, cash flows and returns".
Strategic overhaul and Corvex's stance
Back in April, Whitbread announced its intention to offload all of its standalone restaurants, including the Beefeater and Brewers Fayre chains, while axing close to 4,000 jobs. The group stated that these measures, forming part of its new five-year strategy, were taken in response to the "unexpected" impact of business rates, after the Budget sent tax bills rocketing for thousands of hospitality firms.
The company is also looking to raise £1.5bn through the sale of freehold rights to a greater number of its hotels. Whitbread currently operates around 850 Premier Inn hotels throughout the UK.
Whitbread had pushed back against Corvex's demands for a fresh strategic review, arguing that its plans to dispose of its restaurants and freehold rights had only recently been drawn up. The firm had described any new review as a "complete waste" of time and money.
In a bid to persuade shareholders to award Gemmel a place on the board, Corvex managing partner Keith Meister had said: "Whitbread's persistent structural complexity and chronic misallocation of capital have delivered double-digit negative returns across every reasonable investment horizon – one, three, five, and ten years."
He added: "We have raised these concerns directly and repeatedly with the Board and management, yet rather than undertaking the substantive strategic change the situation demands, they have remained anchored to the status quo."
