Budget hotel chain Travelodge is in secret talks over a takeover bid by Premier Inn owner Whitbread, sources hinted yesterday.
The move to buy Travelodge off it's Dubai-based owners would create a £3 billion hotel giant, with 850 hotels and 56,000 rooms.
It was reported Whitbread had been in talks with Dubai International Capital, which has expressed an interest in purchasing Liverpool Football Club, to buy its share of Travelodge for a stake in the FTSE 100 listed company.
And Travelodge's chief executive Grant Hearn fuelled rumours by cancelling appointments with journalists to discuss the firm's full-year results yesterday.
Travelodge refused to comment on the takeover speculation, but said it was a very positive financial outlook for the year ahead.
The company, which built its first hotel in Lichfield in 1985, saw revenues rise 20 per cent at its 330 hotels, and announced it would be doubling the number of new hotels opened this year as the takeover speculation mounted.
It said the number of rooms sold during 2007 increased by 14 per cent to 5.5 million as it opened a raft of new hotels. But overall occupancy levels - the proportion of total rooms taken by guests - remained static at 77 per cent.
The chain, which employs 5,500 staff, also revealed that 87 per cent of reservations were made online, up from 83 per cent for the year before.
A spokesman said the group was on track to operate 35,000 rooms in the UK by 2010 and to become London's biggest hotel operator by the time of 2012 Olympics with 7,000 rooms in the capital.
It has 24 hotels currently under construction across the UK - including one in Newhall Street, Birmingham, with planning secured for another 39 premises.
The group last year unveiled plans to invest about £775 million to open some 100 hotels across Spain, where it has three existing hotels. The group will target Madrid, Barcelona and Valencia before rolling out to other major cities, suburban areas and airports. Each hotel is expected to have 80-100 rooms.
Mr Hearn said Travelodge's performance last year had been "outstanding" and claimed that the firm had taken market share from bed and breakfasts as well as mid and upmarket hotels.
"We are perfectly positioned to accelerate our stated growth plans in the UK and international markets and we are looking forward to hitting record customer numbers for 2008," he said.
"We are also now attracting 500,000 more low income families than in 2005, including first time users from camping and caravanning markets."
In addition to its UK hotels, the firm also has nine in Ireland and the three in Spain.
Shares in Whitbread were one of the few risers after rumours emerged about the alleged Travelodge takeover.
A spokesman at the company, which also owns Costa Coffee, refused to comment.
A broker at Evolution Securities said they believed Whitbread acquiring Travelodge would be the right move, if competition authorities do not object, adding the estimated value of Travelodge was around the £500-700 million mark.
He also said the rumours that the deal involved equity in Whitbread rather than cash were symptomatic of the lack of credit available for corporate deals at the moment, given the difficult global financial market.