Compass in £1.8bn sale of travel arm

The acquisitive Australian investment bank Macquarie increased its UK presence yesterday by buying the Moto chain of motorway service stations from Compass as part of the scandal-hit group's £1.82bn disposal of its travel catering business.

Macquarie and the European private-equity house EQT beat off rival bidders to acquire Compass's Select Service Partner (SSP) business, paying nearly a third more than analysts had expected the assets to fetch.

The deal, which will be carried out on a debt and cash-free basis, will see Macquarie take over Moto, which runs 48 service stations around Britain. EQT, which is controlled by Sweden's billionaire Wallenberg family, will acquire the remainder of SSP's assets, which include the US airport food and drink business Creative Host Services, and its UK food and drinks concessions which trade at airports and train stations under brands such as Upper Crust and Burger King.

It is thought that Macquarie is paying about £600m for Moto, with EQT paying about £1.2bn for the remaining assets. Macquarie already owns 50 per cent of Bristol airport, South East Water, the M6 toll road, the Steampacket ferry company and Wales and West Utilities. It is also advising Ferrovial on its bid for the airports group BAA, having failed to acquire the London Stock Exchange.

Compass said it planned to return some £500m of the proceeds to shareholders via a share buy-back programme, to be conducted over the next 18 months, while a further £275m is to be used to reduce the deficit in Compass's pension plans. The one-off contribution will wipe out the deficit in the UK scheme. However, Compass will still have a hole of about £115m in its non-UK pension funds.

The deal may go some way towards restoring investor confidence in Compass, which was hit by a scandal over UN catering contracts last year and has recently replaced its chairman and chief executive.

The group said it also planned to buy out the remaining 51 per cent stake which it does not already own in Levy Restaurants, a US company, which will use another £143m of the sale proceeds. The remainder of the funds will be used to pay down the company's debt.

The £1.82bn sale price, which is equivalent to 16 times SSP's 2005 operating profits, is some 30 per cent higher than the top end of analyst expectations. Shares in the company are expected to rise sharply today as a result.

Compass also announced it had completed the sale of a 90 per cent stake in its Inflight catering business to its management for £57m.

Compass announced its plans to sell SSP back in September, generating interest from a number of private equity houses. PAI Partners, Terra Firma, CVC and Macquarie are believed to have been the final four in the running, helping to push up the sale price.

Macquarie is buying Moto in conjunction with four Australian pension funds.Both deals are subject to regulatory approval from European and US antitrust regulators, and are expected to be completed in June.

Last month, Compass announced that it had appointed Richard Cousins, the former head of Britain's largest plasterboard maker BPB, as its new chief executive.

He joins on 1 June, and will work alongside Sir Roy Gardner, the former chief executive of Centrica, who is to become Compass's chairman this summer.