Disposal

Whitbread PLC
14 March 2005



14 March 2005



Whitbread to dispose of Marriott hotels

Whitbread PLC announces its intention to exit from the operation and ownership
of its franchised Marriott hotels business. The company has agreed to form a
joint venture with Marriott through which it expects to realise at least £1bn
over the next two years.

Under the terms of the transaction Whitbread will receive an initial payment
from the joint venture of £710m on 5th May 2005. Of this sum £400m is to be
returned to shareholders; £100m will be used to reduce the company's pension
fund deficit; and the balance to pay down debt.

The Board believes that this transaction fulfils the strategic objectives
outlined in October 2004. It creates more value and realises more capital in a
shorter time than the sale and manageback process that was previously announced.
This transaction and the return of cash to shareholders improves Whitbread's
return on capital employed and enhances earnings per share on a pro forma basis.

The structure of the transaction is as follows:

   • Establishment of a 50/50 joint venture with Marriott to hold the hotel
    properties until sold.


   • Marriott to operate the hotels under long-term management contracts
    while held by the joint venture and following their sale.


   • Whitbread Hotel Company employees to transfer to Marriott on
    establishment of the joint venture.


   • Whitbread to receive consideration of £710m in cash, 50% of the joint
    venture's ordinary and preferred share capital and deferred consideration
    dependent on final sales proceeds achieved by the joint venture.


   • Following completion, Whitbread will return £400m to its shareholders by
    way of a special dividend of 135 pence per share.


   • Joint venture to sell properties within 2 years to achieve maximum value
    and benefit from the current appetite for hotel property assets and the
    continued upturn in the hotel cycle.


   • Whitbread expects total proceeds of at least £1bn, which is in excess of
    the book value of the net assets and the goodwill. The sales value of the
    assets is enhanced by management contracts direct with Marriott.

Alan Parker, Chief Executive of Whitbread PLC said:

'Today's announcement substantially completes the reshaping of Whitbread for the
future. Last year we invested £505m in acquiring Premier Lodge to create the
clear leader in budget hotels, Premier Travel Inn.

'We expect this transaction to realise at least £1bn over the next two years
from a franchised business that, despite good management and operational
performance, does not meet the Group's cost of capital requirements.

'We have accelerated our return of £400m to shareholders. In addition, on the
basis of our current investment plans it is our intention to return at least
half of the proceeds arising from future asset sales announced to date. The
balance will be used to reduce further our pension fund deficit and to pay down
debt. The method and amount of subsequent returns will be determined at the
time.

'Following this transaction Whitbread has a strong platform to build on in the
three sectors of the leisure market where we have leading positions: budget
hotels, restaurants, and health and fitness clubs. A strengthened management
team is focused on disciplined growth and operational synergies to drive
sustainable economic profit. '

Edwin D. Fuller, president and managing director of Marriott Lodging
-International, said:

'We appreciate the strong partnership we have enjoyed with Whitbread as the
Marriott brand has grown to pre-eminence throughout the UK. As Whitbread pursues
a new strategic direction, we in turn look forward to working with a highly
valued team of dedicated associates and new growth from the superb platform of
hotels we have built together.'

Whitbread announces its full year results on 26 April 2005.

Transaction Process and Timetable

The transaction requires approval from Whitbread's shareholders.

A circular containing further details of the transaction will be sent to
Whitbread's shareholders shortly.

Completion of the transaction is subject to a number of conditions, including
the approval of shareholders, the finalisation of non-recourse debt facilities
for the joint venture and UK regulatory clearance.

It is anticipated that completion will take place on 5th May 2005.

A presentation for analysts will be held on 14 March 2005 at Deutsche Bank,
Winchester House, 1 Great Winchester Street, London EC2N 2DB. Registration from
9.00am, presentation at 9.30am.

A live audiocast of the presentation, with accompanying slides, will be
available on the investor relations section of the Whitbread website:
www.whitbread.co.uk.

For more information please contact:

Investor Relations:
Dan Waugh, Whitbread PLC        [phone]; 
                                [phone] (m)

Press Contacts:
Anna Glover, Whitbread PLC      [phone]
Julie Weldon, Whitbread PLC     [phone]
Andrew Grant, Tulchan           [phone]
June Farrell, Marriott          [phone]

Morgan Stanley (Financial Advisers to Whitbread PLC)
Brian Magnus                    [phone]

Deutsche Bank (Brokers to Whitbread PLC)
Roger Aylard                    [phone]

Hoare Govett (Brokers to Whitbread PLC)
Nigel Mills                     [phone]

Transaction Rationale and Background

In its 2004 business review Whitbread's management set out its strategy to
improve the company's overall return on capital and deliver consistent growth
for shareholders. Whitbread set out ambitious growth and investment plans for
its budget hotels, restaurants, and health and fitness clubs. Whitbread also
outlined a programme of asset disposals. As a key part of this strategy, the
transaction represents a significant step for Whitbread and a major enhancement
of the previously announced asset disposal programme. It crystallises
substantial shareholder value and releases the capital within the Marriott
segment for return to shareholders, to pay down debt and reduce the pension
deficit.

The structure of the transaction enables Whitbread to benefit from an improved
Marriott UK sale process compared with the previously proposed sale and
manageback programmes. The transaction offers the benefit of accelerating the
release of capital to Whitbread with £710 million received initially and is
likely to result in higher disposal proceeds overall. Sale prices are likely to
be enhanced compared with the original process because (i) no separate franchise
fee will be paid under the new structure (ii) the simplified structure of a
single franchise owner/manager will improve investor perception and (iii) cost
savings are expected to be generated from the combination with Marriott's
infrastructure which will be captured in the hotels' disposal prices.



Information on the Business Being Disposed

Whitbread's existing Marriott hotel business

In 1995 Whitbread entered into a franchise agreement with Marriott, one of the
world's biggest hotel brands, and since then grew its four-star hotel business
from 12 to 51 hotel assets. Historically the Marriott hotel business also
included 13 three-star Swallow hotels, the disposal of which was announced on 25
July 2003, as well as 11 three-star Courtyard by Marriott hotels, the disposal
of which was announced on 11 November 2004.

Whitbread's Marriott hotel business currently comprises 51 four-star hotels
operated under Marriott brands(1), of which 50 are located in the UK and 1 is
located in Germany. 48 of those hotels are both owned and managed by Whitbread
and 3 are managed by Whitbread but owned by third parties. In addition,
Whitbread's Marriott hotel business comprises 1 four-star hotel located in the
UK, which is still under development and will be operated under the Marriott
brand.

Note:
1. 49 hotels operated under the Marriott brand (including Victoria & Albert), 2
hotels operated under the Renaissance brand


Whitbread's Marriott      Current                  Post Transaction
Hotel Business            Ownership   Management   Ownership   Management
                          
Whitbread's Marriott      Whitbread                Marriott
hotel management
business

Whitbread's hotel assets operated under the Marriott brand

46 hotels in the UK       Whitbread   Whitbread    JV          Marriott
1 operating contract of a Leased by   Whitbread    Leased by   Whitbread
hotel in the UK Victoria  Whitbread                Whitbread
& Albert

Total of 47 hotels

3 management contracts    Third       Whitbread    Third       To be discussed
                          parties                  Parties     with third-party
                                                               owners
1 hotel in Germany        Whitbread   Whitbread    Whitbread   Whitbread
(Treudelberg

1 hotel under development Whitbread   Whitbread    Whitbread   Whitbread
(Leicester)

Whitbread Hotel Company (1) assets not operated under the Marriott brand

1 banqueting & conference Whitbread   Whitbread    Whitbread   Whitbread
centre in the UK 
(Chiswell St)

1 hotel in the UK         Whitbread   Whitbread    Whitbread   Whitbread
(Norwich Nelson)

46 four-star hotels operated under Marriott brands to be sold to the joint
venture

Under the terms of the transaction Whitbread will dispose of 46 of its 51
four-star hotels it both owns and manages to the joint venture. Those hotels
(the 'Marriott Hotel Assets') together represent a total of 8,102 bedrooms and
comprise facilities such as restaurants, bars, leisure clubs and swimming pools,
as well as modern and fully equipped meeting and conference facilities.

Location / Type                # of hotels               # of rooms
London (2)                          6                       1,586
Regional                           31                       5,220
Country Clubs                       9                       1,296
Total                              46                       8,102

Notes:
1. Whitbread Hotel Company is the entity which operates Whitbread's upscale
hotel business
2. Includes Heathrow



Whitbread Hotel Company's management business to be transferred to Marriott

Under the terms of the transaction Whitbread Hotel Company will transfer to
Marriott Hotels Limited substantially all its management business, which
currently manages all of Whitbread Hotel Company's Marriott hotels. This
business employs approximately 8,200 people in the UK and provides the majority
of the services necessary for the operation of the hotels.

The total business being disposed of in this transaction generated operating
profit (pre-exceptionals) of £48.4 million(1) on revenues of £322.5 million and
had net assets of £934.2 million for the year ended 4 March, 2004.

The Retained Assets

The rest of the Marriott hotel business will be retained initially by Whitbread
and is not part of the transaction. This includes the 3 management contracts,
the Chiswell Street banqueting and conference centre, the Norwich Nelson hotel,
the Victoria & Albert hotel, the Treudelberg hotel and the Leicester hotel
currently under development.

Whitbread will discuss with the third party owners the 3 management contracts
with a view to transferring them to Marriott Hotels Limited. It is also the
intention of the management to dispose of the other assets in order to effect a
complete exit from the four-star hotel business. In addition to the value of the
management contracts mentioned above, the retained assets had a net book value
of £75 million as of 4 March, 2004.

Transaction Description

The main elements of the transaction are as follows:

   • Whitbread and Marriott have established a 50/50 joint venture which will
    acquire the Marriott Hotel Assets. The consideration for the acquisition
    will be the payment of £710 million in cash to Whitbread and the issue of
    ordinary and preference shares in the joint venture upon completion. These
    shares will carry fixed returns and an entitlement to deferred consideration
    based on the proceeds of future sales of Marriott Hotel Assets by the joint
    venture on the basis described below.


   • The cash consideration will be funded by the joint venture through £620
    million of non-recourse debt and aggregate cash subscriptions of £90 million
    by Marriott for ordinary and preference shares.

Note:
1. Exceptional item was £9.5 million charge for goodwill impairment



   • Following completion, the Marriott Hotel Assets will be managed by
    Marriott Hotels Limited under management agreements. The joint venture will
    seek to sell the Marriott Hotel Assets to third parties through one or more
    transactions. Sales will be on the basis that the Marriott Hotel Assets
    continue to be managed by Marriott under long term management agreements.


   • Whitbread and Marriott have agreed the basis on which sales of the
    Marriott Hotel Assets will be conducted. The sales process will be managed
    by a steering committee of the board of the joint venture with equal
    representation for Whitbread and Marriott.


   • Whitbread has given certain warranties and indemnities to the joint
    venture. In addition, Whitbread has agreed to pay a termination fee of £10
    million to Marriott if Whitbread's Board withdraws its recommendation or a
    competing transaction successfully completes.

The proceeds of sales of Marriott Hotel Assets by the joint venture and any
surplus cash flow generated by the joint venture will be distributed on the
following basis:

(A)  first, to repay outstanding indebtedness of the joint venture;

(B)  second, to redeem Marriott's preference shares for £70 million plus accrued
dividends of 10% per annum;

(C) third, to redeem Whitbread's preference shares for £70 million plus accrued
dividends of 10% per annum;

(D) fourth, to redeem an equal number of Whitbread and Marriott's ordinary
shares to ensure that, at the time of such redemption, each of Whitbread and
Marriott receive a fixed return of 15% per annum on the £20 million nominal
value of each of their ordinary shares;

(E)  fifth, to pay Whitbread's entitlement to deferred consideration of £195.3
million plus accrued return of 5% per annum; and

(F)  sixth, all remaining amounts to be split equally between Whitbread and
Marriott by way of dividends on or redemptions of their ordinary shares.

Use of Proceeds

As previously stated Whitbread remains committed to returning surplus cash to
its shareholders. Following receipt of the initial consideration of £710 million
it is the Board's intention to return £400 million to shareholders as described
below. Of the balance Whitbread intends to contribute £100 million into its
pension fund in line with its policy of reducing the current deficit over time.
The balance of the initial consideration will be used to reduce group
indebtedness.

The Board intends to return cash to shareholders by way of a special dividend.
There are currently approximately 296 million Whitbread ordinary shares in issue
and the return of approximately £400 million will therefore be made by way of a
special dividend of 135 pence per existing ordinary share. The board is
proposing to pay the special dividend to shareholders in May 2005.

In order to maintain the comparability of Whitbread's share price and earnings
and dividends per share before and after payment of the special dividend, the
board will also seek shareholder approval to implement a share consolidation of
Whitbread's issued share capital. The share consolidation will also have the
effect of maintaining the position of holders of options under the various
Whitbread share option schemes. The further details of the proposed share
consolidation will be contained in the circular convening the extraordinary
general meeting.

Transaction Financial impact

In line with the Board's strategy this transaction will improve the overall
return on capital of Whitbread and will, combined with the special dividend and
the share consolidation, enhance earnings per share on a pro forma basis.

Neither Whitbread nor Marriott intend to consolidate the joint venture.

NOTE TO EDITORS:

About Whitbread

Whitbread PLC is the UK's leading hospitality company, managing market leading
businesses in the hotels, restaurant and health and fitness sectors, including
Premier Travel Inn, Brewers Fayre, Beefeater, Costa, T.G.I. Friday's and David
Lloyd Leisure, and a strategic investment in Pizza Hut (UK).   Whitbread's
strategy is to create value for our shareholders by focusing investment and
growing in expanding sectors of the hospitality industry, primarily in the UK
but also in selected markets. In the financial year to March 4, 2004, Whitbread
generated pre-tax, pre-exceptional profit of £240.8m on sales of more than
£1.8bn. Founded in 1742, the company is listed on the London Stock Exchange (as
WTB.L) and is a member of the FTSE 100 and FTSE4Good indices.

About Marriott

Marriott , INC. (NYSE:MAR) is a leading lodging company with over 2,600 lodging
properties in the United States and 65 other countries and territories. Marriott
operates and franchises hotels under the Marriott, JW Marriott, The
Ritz-Carlton, Renaissance, Residence Inn, Courtyard, TownePlace Suites,
Fairfield Inn, SpringHill Suites and Bulgari brand names; develops and operates
vacation ownership resorts under the Marriott Vacation Club , Horizons, The
Ritz-Carlton Club and Marriott Grand Residence Club brands; operates Marriott
Executive Apartments; provides furnished corporate housing through its Marriott
ExecuStay division; and operates conference centers. Marriott is also in the
synthetic fuel business. The company is headquartered in Washington, D.C., and
has approximately 133,000 employees. In fiscal year 2004, Marriott reported
sales from continuing operations of $10 billion.




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