London's Thistle To Sell 37 Hotels For 853 Million USD - Group Will Continue To Manage The 37 Hotels It Is Selling.

The principal features of the transaction are:

• Total payment to Thistle of £600.4 million, comprising £1 to be paid in cash on completion by the Acquirer to Thistle for the shares in three companies (the "Sale Companies") that own the hotels and carry on the Hotel Businesses, the repayment on completion by certain of the Sale Companies and certain subsidiaries of the Sale Companies of approximately £555.4 million in settlement of outstanding inter-company indebtedness due to Thistle and £45 million payable no later than 1 January 2005 pursuant to a loan note issued to Thistle by one of the companies to be sold to the Acquirer.
• Upon completion of the Disposal, Thistle Hotels (Management) Limited, a wholly-owned subsidiary of Thistle, will enter into agreements under which it will undertake the ongoing management of each of the hotels for a period of 30 years from completion of the Disposal.
• A relationship agreement will be entered into between Thistle and the Orb group which will contain, among other provisions, a guarantee by Thistle in relation to the level of earnings before interest, tax, depreciation and amortisation ("EBITDA") derived from the Hotel Businesses.
• The cash proceeds of the Disposal will amount to approximately £555.4 million, before transaction costs, a working capital adjustment and the repayment to Thistle of the loan note. No significant tax liability is expected to arise for Thistle on the Disposal of the Hotel Businesses. £174.0 million of the net cash proceeds will be applied in the first instance to repay Thistle's bank loans and the balance of the proceeds will increase the Company's cash position by approximately £381.2 million (before transaction costs), thereby providing Thistle with greater resources to pursue potential strategic acquisition opportunities for further growth and development.
• The 37 Hotel Businesses being disposed of comprise Thistle's Regional hotels, excluding Thistle Heathrow and Thistle Edinburgh, and six London hotels.
• For the year ended 30 December 2001, the Hotel Businesses had turnover of £140.8 million and operating profit of £42.1 million, after charging depreciation and amortisation of £13.4 million (giving EBITDA of £55.5 million).
• Due to its size, completion of the Disposal requires the approval of Thistle's shareholders. Irrevocable undertakings to approve the Disposal have been given by shareholders representing approximately 59 per cent. of the issued ordinary share capital of Thistle.

A circular will be posted to shareholders shortly setting out details of the Disposal and convening an Extraordinary General Meeting to approve the Disposal. The Disposal is expected to be completed following its approval at the Extraordinary General Meeting.

Commenting on the Disposal, David Newbigging, Chairman of Thistle, said:

"This disposal represents a further significant step in the re-positioning of the Company and both improves and rebalances Thistle's hotel portfolio. By concentrating on delivering growth through our core hotel management business, with a reduced emphasis on the capital intensive ownership of hotel properties, we expect to benefit from increased operating flexibility. This transaction significantly strengthens our balance sheet and leaves us well placed to pursue potential strategic acquisition opportunities for further growth and development, with the objective of delivering value to our shareholders and improving the return on shareholders' equity."

Ian Burke, Thistle's Chief Executive Officer, added:

"The Board believes there will be opportunities for the continuing Thistle group to develop its hotel business. Over the course of the current financial year the Board's focus will continue to be on managing the business efficiently, improving operational cash flow generation and seeking opportunities to improve the return on shareholders' equity."

The Chairman of Orb Estates Plc, Samuel Nolan, commented:

"We are particularly pleased to have become involved with Thistle Hotels and to have been part of such an innovative restructuring process."

Enquiries:
Thistle Hotels Plc - Tel: 020 7895 2304
Ian Burke, Chief Executive Officer
Ian Durant, Finance Director
Merrill Lynch Tel: 020 7628 1000
Simon Mackenzie-Smith
Richard Nourse
Deutsche Bank Tel: 020 7547 6925
Charles Wilkinson
Hogarth Partnership Limited Tel: 020 7357 9477
Nick Denton / Chelsea Hayes

An analysts' conference call will be held at 10.00 am today. To access please dial 020 8240 8248 or contact the Hogarth Partnership.

This summary should be read with the full text of the attached announcement.

NOTES TO EDITORS
Thistle is the largest hotel group in London with 22 hotels in prime locations throughout the capital and has hotels in key regional cities of England, Scotland and Wales.

There are 56 hotels in the group, of which 55 are owned and 1 is managed. There are a total of 10,727 bedrooms, of which 70 rooms are managed. In London, Thistle has 6,014 rooms in 22 hotels and, in the regions, 4,713 rooms in 34 hotels (including 70 rooms in Thistle Poole under management).

Thistle's London hotels include the Thistle Tower, the Thistle Charing Cross, the Thistle Marble Arch, the Thistle City Barbican, the Thistle Victoria and The Royal Horseguards. Thistle has hotels in Aberdeen, Bristol, Birmingham, Cardiff, Edinburgh, Glasgow, Liverpool, Manchester and Newcastle among other regional centres as well as hotels at airports in Aberdeen, East Midlands, Gatwick, Heathrow, Luton and Manchester.

Merrill Lynch International is acting for Thistle and no one else in connection with the proposals described in this press release and will not be responsible to anyone else for providing the protections afforded to the clients of Merrill Lynch International nor for providing advice in relation to such proposals.

Introduction

Thistle announces that it has today reached agreement with Gamma Four Limited (the "Acquirer") regarding the terms of the proposed disposal of a group of subsidiary companies of Thistle which together own 37 Regional and London hotel businesses in return for a total payment of £600.4 million, including the settlement of inter-company indebtedness (the "Disposal"). The Acquirer, which is a wholly-owned subsidiary of Euro & UK Property Limited (a private venture capital company and the ultimate parent of the Orb group), will acquire the shares in the relevant companies and will assume the liabilities of the companies being sold. The constituent elements of the total amount to be paid to Thistle comprise:

(a) £1 to be paid in cash by the Acquirer to Thistle for the shares in the three companies, London Park Hotels Limited, Exitcluster Limited and Kingsmead Hotels Limited, (the "Sale Companies") that either directly, or indirectly through certain wholly-owned subsidiaries, own the hotels and carry on the Hotel Businesses which are being disposed of;

(b) the repayment by certain of the Sale Companies and certain subsidiaries of the Sale Companies of approximately £555.4 million in settlement of outstanding inter-company indebtedness due to Thistle; and

(c) £45 million payable pursuant to a loan note issued to Thistle by LPH London Park Limited, one of the companies to be sold to the Acquirer as part of the proposed transaction.

The £1 payable for the shares in the Sale Companies and the £555.4 million payable to settle the outstanding inter-company indebtedness are to be paid to Thistle immediately upon completion of the Disposal. In addition, there will be a pound for pound payment for the actual working capital (excess, or deficit, of current assets over current liabilities) in the Hotel Businesses at completion. The loan note is to remain outstanding and will be redeemed no later than 1 January 2005.

Upon completion of the Disposal, Thistle Hotels (Management) Limited, a wholly-owned subsidiary of Thistle, will enter into agreements under which it will undertake the ongoing management of each of the hotels for a period of 30 years from completion of the Disposal. In addition, a relationship agreement will be entered into to govern the relationship between Thistle and the Orb group. This agreement will contain, among other provisions, a guarantee by Thistle in relation to the level of earnings before interest, tax, depreciation and amortisation ("EBITDA") derived from the Hotel Businesses.

Completion of the Disposal is, because of its size, conditional on the approval of Thistle's shareholders. Thistle's two largest shareholders have given irrevocable undertakings to the Acquirer to vote in favour of the Disposal. A circular convening an Extraordinary General Meeting ("EGM") to seek approval for the Disposal will be posted shortly to Thistle shareholders. The Disposal is expected to be completed following its approval at the EGM.

Background to and reasons for the Disposal

During 2001 Thistle completed a three-year major upgrade programme positioning the Company as a leading full-service hotel group and improving its comparative position. This programme has resulted in a continuation of improvements in Thistle's ranking as a brand in the UK hotel market. In December 2001, Thistle sold its Poole hotel business to Orb Estates Plc, a privately owned, UK-based property company within the Orb group, and now manages that hotel under an operating agreement. The Disposal represents a further significant step in the re-positioning of the Company and both improves and rebalances Thistle's hotel portfolio. By concentrating on delivering growth through its core hotel management business, with a reduced emphasis on the capital intensive ownership of hotel properties, Thistle expects to benefit from increased operating flexibility. The Board believes that the terms of the Disposal reflect the value and prospects of the Hotel Businesses which are the subject of the Disposal.

The net cash proceeds of the Disposal will be applied in the first instance to repay Thistle's bank loans and the balance of the proceeds will increase the Company's cash position, thereby strengthening Thistle's balance sheet. This will provide the Company with greater resources to pursue potential strategic acquisition opportunities for further growth and development with the objective of delivering value to its shareholders and improving the return on shareholders' equity.

Information on the Hotel Businesses

The Hotel Businesses comprise Thistle's Regional hotels, excluding Thistle Heathrow and Thistle Edinburgh, and six London hotels. The six hotels in London are Thistle Lancaster Gate, Thistle Bloomsbury, Hendon Hall, Cannizaro House, Thistle Kensington Park and Thistle Kensington Palace.

For the year ended 30 December 2001, the Hotel Businesses had turnover of £140.8 million and operating profit of £42.1 million, after charging depreciation and amortisation of £13.4 million (giving EBITDA of £55.5 million). As at 30 December 2001 the net assets of the Hotel Businesses were £609.7 million.

Principal terms and conditions of the Disposal

The Disposal is to be effected pursuant to a share sale agreement dated 12 March 2002 which provides for the sale to the Acquirer of all of the shares held by Thistle in each of the three Sale Companies which own directly or indirectly the hotels and carry on the Hotel Businesses (the "Share Sale Agreement"). Euro & UK Property Limited, a private venture capital company which is the ultimate parent company of the Orb group, and Orb Estates Plc have agreed to guarantee, on a joint and several basis, the obligations of the Acquirer under the Share Sale Agreement and other documents entered into by it in connection with the Disposal.

The total initial payment to be made to Thistle under the Share Sale Agreement will comprise: (a) £1 to be paid in cash by the Acquirer to Thistle for the shares in the Sale Companies; and (b) the repayment by certain of the Sale Companies and certain subsidiaries of the Sale Companies to Thistle of approximately £555.4 million in settlement of the outstanding inter-company indebtedness due from them to Thistle. The Share Sale Agreement also provides that there will be a pound for pound payment between Thistle and the Acquirer in respect of the working capital employed in the Hotel Businesses as at completion of the Disposal which, if negative, would result in a payment by Thistle to the Acquirer.

In addition, one of the companies being disposed of, LPH London Park Limited, has issued to Thistle a £45 million interest-bearing loan note with a coupon of 5 per cent. per annum which is to remain outstanding and is to be redeemed no later than 1 January 2005. The obligations of LPH London Park Limited under this loan note will be guaranteed by the Acquirer, Euro & UK Property Limited and Orb Estates Plc with effect from completion of the Disposal. Thistle will be granted a second ranking charge over the shares in Hotel Portfolio II (Jersey) Limited, a Jersey incorporated company within the Orb group, by way of security for the guarantee obligations in respect of the loan note. Thistle's rights in respect of this second ranking charge are fully subordinated to those of Morgan Stanley Dean Witter Bank Limited, the provider of debt finance to the Orb group in connection with the Disposal, and accordingly there can be no certainty that Thistle will ultimately realise the full value of the loan note.

Completion of the Disposal is conditional only upon the approval of the shareholders of Thistle and upon neither Thistle nor any relevant member of the Sale Companies and their respective subsidiary undertakings being the subject of certain insolvency events in the period prior to completion. All documents required to effect completion have been executed and, together with the monies payable at completion in connection with the Disposal, have been placed into escrow pursuant to the terms of an escrow agreement entered into between, among others, Thistle, the Acquirer and the escrow agent. It is expected that the relevant documents and monies will be released from escrow in accordance with the terms of the escrow agreement following the EGM.

Upon completion of the Disposal, Thistle Hotels (Management) Limited, Thistle and Hotel Portfolio II UK Limited, a wholly-owned subsidiary of Euro & UK Property Limited, will enter into separate operating agreements on arm's length terms for the ongoing management of each of the hotels by the Thistle group for a period of 30 years from completion of the Disposal.

Thistle Hotels (Management) Limited, Thistle and Hotel Portfolio II UK Limited will also enter into a relationship agreement which will govern certain aspects of the relationship between the continuing Thistle group and Hotel Portfolio II UK Limited. In particular, the relationship agreement will contain a guarantee by Thistle in favour of Hotel Portfolio II UK Limited in relation to the level of EBITDA derived from the Hotel Businesses, in accordance with the terms of the operating agreements, in each of the ten years following completion of the Disposal. Under this guarantee, the minimum EBITDA guaranteed by Thistle in any one year cannot exceed £45 million and Thistle's maximum aggregate liability over the whole term of the guarantee is capped at £90 million.

Irrevocable undertakings to vote in favour of the Disposal

Thistle's two largest shareholders, BIL International Limited and Government of Singapore Investment Corporation Pte Limited, have provided the Acquirer with irrevocable undertakings to vote in favour of the Disposal in respect of their entire holdings of ordinary shares in Thistle, representing in aggregate approximately 59 per cent. of the issued ordinary share capital of the Company.

Financial effects of the Disposal

The cash proceeds of the Disposal will amount to approximately £555.4 million, before expected transaction costs of £3.5 million, a working capital adjustment and the repayment to Thistle of a loan note issued by LPH London Park Limited amounting to £45 million. No significant tax liability is expected to arise for Thistle on the Disposal of the Hotel Businesses. The net cash proceeds of the Disposal will be applied in the first instance to repay Thistle's bank loans of £174.0 million with the balance of the proceeds increasing the Company's cash position by approximately £381.2 million (before transaction costs). With pro forma net cash of £380.0 million as at 30 December 2001, Thistle will have greater resources to pursue potential strategic acquisition opportunities for further growth and development.

Based on the net assets of the Hotel Businesses as at 30 December 2001, namely £609.7 million, the net loss on disposal is £13.0 million. However, the net assets on completion will be less than £609.7 million because of the adoption of FRS 19 "Deferred taxation" (which requires the provisioning for deferred taxation in full) and depreciation up to completion. Accordingly, an actual net profit on disposal will be recorded and disclosed as an exceptional item during the financial year ending 29 December 2002.

Current trading and prospects

The following statement is set out in Thistle's unaudited preliminary results for the year ended 30 December 2001, announced by the Board on 4 March 2002:

"Over the first eight weeks of the current financial year, turnover was down some 10 per cent. on the comparative period last year with a greater decrease in London against a strong comparative period in the early months of 2001. However, turnover over this eight week period is broadly in line with the same period in 2000. We intend to actively manage our costs, with a focus on reducing our cash operating expenditures and capital expenditures in 2002, as compared to 2001."

The Board believes there will be opportunities for the continuing Thistle group to develop its hotel business. Over the course of the current financial year the Board's focus will continue to be on managing the business efficiently, improving operational cash flow generation and seeking opportunities to improve the return on shareholders' equity.

Management and employees

Each of Thistle and the Orb group attaches importance to retaining the skills and experience of the management and employees of the Hotel Businesses. Although the general managers of the hotels will continue to be employed by Thistle, the remaining management and employees of the Hotel Businesses will become employees of the Orb group following completion of the Disposal.

Extraordinary General Meeting

A circular containing further details of the proposed Disposal and convening an Extraordinary General Meeting to approve the Disposal will be posted to Thistle shareholders shortly.