Whitbread buy tried and tested
The Investment Column
Wednesday 31 July 1996
Whitbread realised it had little exposure to what it calls the urban casual dining market so well catered for by Pelican's chains such as Dome, Cafe Rouge and Mamma Amalfis. It faced two options, taking Pelican on at its own game or buying the company.
Clearly, buying an existing player carries some intrinsic risks. There is a danger that the management which started the operation will disappear at the first opportunity with its new-found wealth. Culture clashes are a potential problem. And goodwill has to be paid - in this case pounds 100m out of a total payment of pounds 133m.
The advantage of doing it this way, however, is that the formula is already tested. In the case of Pelican, a London-based concept has already been pushed out, tentatively, into the provinces and it appears to work.
So Whitbread is buying a proven but cash-strapped formula. If it has any sense, it will stand well back, let Pelican's management have access to its money, provide Pelican with the benefits of its better buying power and systems and watch its investment grow.
The technique is similar to the investment strategy of Mark Slater, son of Jim, and manager of a league-table topping unit trust. Using his father's investment philosophy he has started buying companies with a proven record of earnings growth, cheap relative to their potential growth rate, and which have already started outperforming the market.
As with buying shares, the formula applies to buying complete businesses and it would be surprising if Whitbread did not make a very tidy return out of Pelican.
- 1 East 17 bandmember Brian Harvey in 'very desperate situation’
- 2 Is this bridge haunted by the ghost of nu rave?
- 3 Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
- 4 The West has it totally wrong on Lee Kuan Yew
- 5 Scientists have discovered a simple way to cook rice that dramatically cuts the calories
East 17 bandmember Brian Harvey in 'very desperate situation’
Vladimir Putin says Russia will fight for the right of Palestinians to their own state
Is this bridge haunted by the ghost of nu rave?
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
Saudi Arabia says it won't rule out building nuclear weapons
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
The West has it totally wrong on Lee Kuan Yew
Revealed: Putin's army of pro-Kremlin bloggers
iJobs Money & Business
Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...
Negotiable: Recruitment Genius: You will be the first point of contact for all...
£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...
£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...