US Hedge fund Elliott Advisors has made around £32.4million from a £500million boost to Costa Coffee owner Whitbread’s share price after reports it wants to break up the business.
Shares in Whitbread, which also owns Premier Inn, jumped 7.2 per cent following reports that the activist investor had taken a 6 per cent stake, equivalent to around £464 million at its current price.
Elliott, which is the ninth largest hedge fund in the world with £24billion under management, thinks it can unlock an additional £3billion in value by spinning off the coffee shop business and listing it as a separate company. The reports appeared to cheer investors, who have been waiting for a boost to the group’s share price, which has traded relatively flat of late.
Shares in the owner of Costa Coffee jumped by 7.2 per cent
Many shareholders believe separating Premier Inn and Costa Coffee will boost returns. The challenge to Whitbread began in December when it was revealed activists Sachem Head had taken a 3.8 per cent stake.
Russ Mould, director at AJ Bell, said: ‘They are very different businesses and could be worth more as separate entities rather than as part of the current leisure conglomerate.’
Earlier this year Whitbread’s chief executive Alison Brittain, 53, refused to rule out a break-up as an option for restructuring. Elliott is run by the billionaire Paul Singer, 72, who has been described as one of the most feared activist investors in the world.
Elliott and Sachem Head are understood to have met Whitbread’s chairman Adam Crozier to discuss the plausibility of splitting the business.