Compass in £300m buyback

CATERING group Compass is to buy back up to £300m of its shares after selling its Travelodge and Little Chef chains. The buyer is private equity company Permira, formerly known as Schroder Ventures, which is paying £712m.

The company said the buyback programme would not start before the deal is completed at the end of January. The shares rose 3 1/2p to 333 3/4p in early trade. They have rallied since hitting a 12-month low of 251p in September.

Travelodge, the UK's second- largest budget hotel company with more than 12,000 rooms, and Little Chef, with 368 roadside restaurants, were put up for sale after a Compass strategic review concluded they were non-core businesses. In the last financial year, the two made operating profits of £105m on sales of £368m.

The long-expected sale was welcomed by the City, which has complained that they sucked up cash that could be put to better use in Compass's fast-growing contract catering business.

Whitbread, which owns Travelodge's rival Travel Inns, was tipped as a possible buyer along with Six Continents and French hotels group Accor. But the auction attracted more interest from private equity funds.

Analysts estimated that Compass might raise £750m from the sale though pessimists thought £600m was nearer the mark.