Compass sells Little Chef and Travelodge

Compass revealed in June that it was selling the roadside restaurant and hotel groups in order to concentrate on its contract catering and vending business.

It has now agreed to sell the two for £712m to a new company being formed by Permira, the private equity group.

Permira said it was "acquiring two leading brands in one transaction" and that it would expand both companies.

Compass meanwhile said it would use the funds to pay down debt and buy back shares.

'Arms length'

Travelodge is the second largest budget hotel group in the UK, which Permira described as "the fastest growing sector in the industry".

Little Chef has 368 restaurants on UK roads, as well as outlets in Compass Group's Moto road services sites.

But Compass said in June that neither company fitted with its strategy to focus on "contract foodservice, vending and selected foodservice concessions".

It will continue to house Little Chef restaurants at its Moto outlets in what it calls "arms length franchise agreements".

The sale is dependent on clearance from the European Commission by the end of January 2003.