Outlook: Whitbread/Swallow

WHITBREAD'S CHIEF executive, David Thomas, says he was drinking champagne on Sunday night to toast his "amicable" takeover of Swallow Group, and who can blame him? Unlike Whitbread's humiliating failure to acquire 3,500 pubs from Allied Domecq last summer, this time there is, apparently, no evil Mr Punch waiting in the wings to spoil the party.

Greenalls, the only likely contender, has politely ruled itself out of the running. With customary courtesy, Greenalls' Lord Daresbury congratulated Whitbread on its deal, even though he may become Mr Thomas's next target.

Mr Thomas was falling over himself yesterday to banish the ghosts of the past. Sounding like a war-time politician, he claimed the Swallow deal proved: "We have not been paralysed by fear and inaction ... We have not fallen off the horse, but are pursuing a clear strategy."

This strategy, he said, involved reverting to 'Plan A', and filing away the Allied saga in the box marked: "'Plan B' which, unfortunately, went by the wayside". Plan A, it has to be said, was never the most cunning of strategies and certainly overpaying for Swallow is no substitute for acquiring the Allied pubs on the cheap.

Nothing in Whitbread's recent record would suggest justification for the very full price Whitbread is paying for Swallow. Whitbread's margins, both in hotels and restaurants, are lower by an order of magnitude than many of its peers. Continuing to expand in pubs, restaurants, health clubs and hotels through piecemeal acquisition seems a reasonable enough strategy on paper, but only if the company is capable of significantly improving the performance of these acquisitions. In hotels, Whitbread's revenue per available room was last year the lowest out of comparable hotel groups. That doesn't give much cause for confidence.

However hard Mr Thomas tries to appropriate Mr Punch's catchphrase - "That's the way to do it" - the minuscule movement in Whitbread's share price yesterday shows that few in the City are yet inclined to join him in cracking open the champagne. The wounds of the Allied battle may be starting to heal. But it takes a lot more than a plaster to heal a broken back.