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This presentation provides a comprehensive evaluation of Bass and Whitbread, focusing on their financial performance, shareholder value creation, and strategic decisions. As consultants from an international consulting group, we analyze the corporate strategies of these leading firms in the brewing and hospitality sectors. The report delves into market trends, significant mergers and acquisitions, and the impacts of industry regulations. We also offer insights into pricing, profitability, valuations, and future opportunities for fit within the current marketplace.
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Corporation Strategy Analysis and Valuation Bass and Whitbread
Introduction • Analysts representing an International Consulting Group • Specialising in Business Strategy and M&A • Asked to prepare presentation to the board of a rival company • Your company is looking for: • How much you will need to pay? • Understanding of corporate strategy – opportunity for fit? • Understand the strategic choices made by each company over the past several years
Consultants Sharon Hodgson Quentin Cole Gary Woodman Bob Jose
Purpose • Evaluate each company in terms of: • Financial performance • Relative shareholder value creation • Analyse strategy in relation to performance • Conceptualise strategy and suitability to the industry
Industry Overview • Brewing industry • Important part of history • Adversely effected by Government regulation in 1989 • Consolidation in marketplace for horizontal integration • Fragmentation of global brewing market • Restaurant/Hotel industry • Effect of social and demographic changes • High cost to entry • Globalisation of companies • Resulting in M&A activity to reduce costs, increase quality & service Mass exodus from brewing industry
Whitbread Snapshot • Leading UK leisure provider • Leading health and fitness club operator • Largest budget hotel chain in Uk - 262 Travel Inns • 1,600 restaurants in Uk and Europe Turnover down -17% to £3095m Operating Profit down 4% to £394.8m Loss of £17.9m on disposal of Beer Company Dividend per share up 6% to 31.15p Adj. EPS down -1% to 53.49p
Whitbread Major Events • 1989 – Acquired Boddingtons Brewery • 1990 – Acquired Berni chain restaurants • 1995 – Acquired Marriot Hotels & David Lloyd Leisure (16 clubs) • 1998 – First significant disposals • 2000 – Sold Whitbread Beer Company for £394 m • Acquisition of Swallow Group • Sold 50% share of First Quench for £112 m • JV with Punch Group to develop Travel Inns • 2001 – Fairbar – combined pubs and bars group, sold for £1.6bn (£1.1bn went to shareholders)
Growth matrix for Whitbread Breweries (star pre 1990) Business growth rate David Lloyd health and fitness clubs ? Whitbread Hotel Co. Marriott Swallow Travel Inns Restaurants (pre 1990) H L £ Restaurants Beefeater, Pizza Hut Brewers Fayre TGI Fridays Costa Coffee Pelican Group Bella Pasta Café Rouge Mamma Amalfi Pubs/drinks (pre 1990) Breweries/pubs (disposed 00/01) H L Market share
Bass (Six Continents) Snapshot • Turnover up 22.8% to £3775m • Operating Profit up 24.8% to £776m • Profit on Disposal of Bass Breweries £1,231m • Dividend per share up 3.1% to 33.3p • Adj. EPS up 8.9% to 62.2p • “Leading Hotel Group and UK’s leading operator of managed restaurants, pubs and bars” • 3060 Hotels • 491,000 Rooms • 6 continents
Bass Major Events • 1989 – Acquire Holiday Inns International • 1990/01 – Cultivate and build Holiday Inn Brands • 1994 – Crowne Plaza & O’Neills brands launched • 1996– MMC blocks acquisition of Carlsberg-Tetley and Disposal of low growth/low profit companies • 1998 – Acquisition of Inter-Continental Hotels for £2 bn. • 2000 – Sell brewing arm and the Bass Brand • 2001 – Acquires Posthouse UK and hotels in Australia and US • 2001 – Bass changes name to Six Continents • Chief Exec headhunted
Growth matrix for Bass Breweries (star pre 1990) Business growth rate Harvesters O’Neills Ember Inns Toby ? Intercontinental Crowne Plaza Holiday Inn Holiday Express Restaurants (pre 1990) H L £ Hotels - building Britvic/Pepsi Hotels (2000 Onwards) Breweries/pubs (disposed 00/01) H L Market share
Current Share Price Bass 722p 22/11/01 High 1175p Low 438.5p Whitbread 564p 22/11/01 High 1130p Low 421p
Investor Analysis • Bass share price out-performing Whitbread and Hilton • Bass out-performing FTSE 100 by 12.5% • £1000 invested Jan 1994: • Bass gain of £486.16 (£1487.32) • Whitbread loss of £29.40 (£975.72) • Is this the whole story?
Valuations Market Capitalisation Whit:£1669.91 Bass: £6250.12 NAV Whit: £2645.70 Bass: £5379.00
