Shareholders in Premier Inn owner Whitbread (WTB) only have days to decide if they want to sell some of their shares back to the company as part of a £2bn tender offer.

The tender offer is a way of returning some of the proceeds from Whitbread’s £3.9bn sale of Costa Coffee to Coca-Cola earlier this year.

Whitbread’s official deadline to take part in the tender offer is 1pm on 19 July but many investment platforms want shareholders to vote by an earlier deadline, some as early as 16 July.

Shareholders taking part in the tender offer will get their cash from 30 July.

Companies often return cash from disposals to shareholders via special dividends. Whitbread has instead opted for a tender offer as it is more tax-efficient for many of its shareholders who own the stock outside of an ISA or SIPP. 

A tender offer is subject to capital gains tax. UK residents have a £12,000 annual capital gains allowance, whereas they only have a £2,000 annual dividend allowance.

For those with capital gains or dividends exceeding their annual allowance, the Whitbread tender offer could still be a better option from a tax perspective. For example, higher rate taxpayers pay 20% for capital gains and 32.5% for dividends.

Shareholders taking part in the tender offer won’t know the exact price at which their shares will be bought until 22 July.

They can either submit a tender to sell some or all of their shares at whatever price is ultimately determined, capped at £50.

Or they participate in the tender offer at a range of prices based on between a 0% and 5% premium to the volume-weighted average price over the five days to 19 July, again no higher than £50.

Alternatively, shareholders can choose to do nothing and retain their existing holding.

Whitbread has already spent £480m from the Costa proceeds on share buybacks and says it will consider another programme to return cash should the current tender offer fail to attract demand for the full £2bn target.

Shares in Whitbread trade at £48.09 at the time of writing and have risen by 20% in value in the past 12 months.

Following the sale of Costa, Whitbread now consists of 1,200-plus Premier Inn hotels and restaurants across the UK and one hotel in Germany, with plans to expand to more than 30 sites in that country by 2020/21. Its casual dining brands include Beefeater and Brewers Fayre.

A first quarter trading update on 19 June revealed a 4.6% decline in like-for-like sales for UK accommodation and a 2.1% drop in food and beverage like-for-like sales. Chief executive Alison Brittain said she was cautious about short-term market conditions, but remained confident about longer-term growth plans in the UK and Germany.

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