By Ben Martin
LONDON (Reuters) - Britain's Whitbread (LON:WTB) is open to selling its Costa coffee chain or Premier Inn hotels and abandoning its original plan to spin-off the coffee business, according to a new executive pay scheme circulated to shareholders.
The FTSE 100 company said in April it planned to demerge Costa into a separately listed company within two years to "provide shareholders with an investment in two distinct, focused and market-leading businesses".
But a new remuneration policy sent to shareholders this month, and published on Whitbread's website, shows the firm is willing to consider a sale of either Costa or the hotel chain to another company instead.
Whitbread, led by CEO Alison Brittain, is overhauling its executive pay scheme to account for its new objective of separating its two main divisions. The scheme now includes a so-called performance share plan linked to delivering that goal.
Executives will be rewarded for separating the divisions "whether that is implemented by way of demerger or by way of the sale to a third party of all or substantially all of one or other of those businesses", the circular to shareholders says.
That differs from Whitbread's April announcement, when the company referred only to a Costa demerger.
The company, which has a market value of about 7.7 billion pounds ($10.3 billion), pledged to separate its main businesses after coming under pressure to do so from U.S. activist investors Elliott and Sachem Head.
Selling Premier Inn or Costa rather than a demerger could put Whitbread's bosses at loggerheads with Elliott, which believes splitting them into two listed entities will allow the stock market to properly value the businesses, a source familiar with the matter told Reuters in April.
Elliott is Whitbread's single biggest shareholder with a stake of more 6 percent.
The activist hedge fund has already argued that a Costa demerger should be completed within six months, rather than the two-year timeframe eyed by Whitbread.
A Whitbread spokeswoman said the purpose of the pay policy was to focus the management team on a spin-off.
"There is no sale process for either Costa or Premier Inn – demerging into two independent companies remains the strategic objective," she added.
Since the announcement of the demerger there has been speculation Whitbread could attract a bidder for either the coffee chain or hotel division.
JAB Holdings, the investment fund of Germany's billionaire Reimann family, has been buying up coffee businesses in recent years and bankers had considered it a possible suitor for Costa.
But JAB snapped up British sandwich and coffee shop chain Pret A Manger for about 1.5 billion pounds last month in a move some bankers now think makes it less likely to consider an offer for Costa.
Whitbread's new pay policy will be put to an investor vote at a shareholder meeting scheduled for June 27. It will require the support of investors owning more than 50 percent of the company's shares.
Shares in the company were down 0.6 percent at 41.62 pounds on Thursday afternoon.
(This story has been refiled to fix typo in paragraph 5)