Shares in Costa Coffee owner Whitbread (WTB) have risen by 6.5% to £39.50 since news (6 Dec) that activist investor Sachem Head Capital now owns 3.4% stake of the business.

Sachem is a hedge fund with a history of piling pressure on firms to overhaul their operations to boost performance with previous targets including rare diseases specialist Shire (SHP). According to media reports, Sachem wanted Shire to consider a sale or spin-off of several of its assets.

Investors are excited by the sudden appearance of Sachem as it reignited speculation that Whitbread could be broken up into separate businesses, being Costa and its hotels chain Premier Inn.

Numis analyst Tim Barrett says other strategies which Sachem or another activist investor could pursue include extracting value from Whitbread’s 410 pub restaurant sites or from other freehold assets within the group.

Shares in Whitbread have barely moved since the start of 2016 as the company finds it harder to grow UK sales in a competitive market. Its strategy is currently focused on driving further growth in the UK as well as structural growth opportunities for Premier Inn in Germany and Costa in China. (LMJ)

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