Proposed Separation and Return of Capital

1st Oct 2002

[London, 1 October 2092] The Board of Six Continents PLC (Á¤Six ContinentsÁ¬) announces the proposed separation of the group`s hotels and soft drinks businesses (Á¤HotelsÁ¬) from the retail business (Á¤RetailÁ¬) and the return of £700m of capital to shareholders. This will create separately listed hotel and retail companies, each better placed to pursue their individual strategies and drive their operational development. In the BoardÁ?s view this will enhance their ability to generate value for shareholders.

The Board also announces its intention to recommend a final dividend for 2002 of £210m and declare an interim dividend for 2003 of approximately £60m, giving a total return over the period to separation of £970m.

Conditions in the hotel industry remain difficult, but asset prices have stayed at levels which mean that value enhancing acquisitions have not become available.

Over the last five years Six Continents has been transformed from a leisure conglomerate into a group focused on two principal businesses, hotels and pubs and restaurants. Both businesses have developed powerful market positions with strong brand portfolios. Hotels is one of the leading global hotel companies and Retail is the leading operator of managed pubs and restaurants in the UK.

Therefore, the Board proposes that the return of surplus capital is accompanied by the separation of the businesses. Through the separation, in return for their shares in Six Continents, shareholders will receive shares in Hotels, and shares in Retail. The Board intends that Shareholders will also receive 81p per existing share in cash. This would mean that Six Continents will have returned £3bn to shareholders from 1997 to the date of separation being a return of £1.55bn in capital and £1.45bn in dividends.


The separation will have the following benefits:

?h Two separate UK listed companies offering discrete investment propositions and with clear market valuations ?h Greater flexibility for Hotels and Retail to manage their own resources and pursue strategies appropriate to their markets, which have different characteristics and opportunities ?h Management rewards more directly aligned with business and stock market performances, helping to attract, retain and motivate the best people ?h Sharpened management focus, helping the two businesses maximise their performance and make full use of their available resources ?h Improved ability for Hotels and Retail to develop their strong positions through participation in industry restructuring and consolidation, if appropriate ?h Transparent capital structure and efficient balance sheet for each business.

Standard & Poor`s and Moody`s have given guidance that on the basis of discussions which have taken place they expect Hotels to be rated BBB/Baa2 on completion of the separation. The management of Hotels is committed to retaining investment grade credit ratings.

Standard & PoorÁ?s and MoodyÁ?s have also given guidance that they expect Retail to be rated BBB-/Baa3. The management of Retail believe this is compatible with its strategy and its desire to retain investment grade credit ratings.

The Board of Six Continents intends, absent a material change in circumstances in the trading environment or capital markets, to return £700m to shareholders at the time of the separation. The estimated debt as at 30 September 2003 following separation and the proposed return of capital will be around £1.3bn in Hotels and around £1.3bn in Retail. This is after intended 2003 capital expenditure of the order of £500m in Hotels and £175m in Retail.



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