Leisure group Whitbread is in exclusive talks to buy budget hotel chain Premier Lodge for £540 million, it was reported today.

The company is understood to have beaten off competition from private equity group Apax Partners in the last round of bidding over the weekend.

According to The Times, a deal with Burton-on-Trent based pubs group Spirit could be clinched in the next few days.

Victory in the race for Premier Lodge, which comprises 132 hotels employing 5,000 staff, would make Whitbread the leading player in the budget hotel sector.

It currently operates 302 hotels under the Travel Inn brand, compared with the 253 owned by nearest rival Travelodge.

A Whitbread spokesman declined to comment on the report today, but added: "We have said all along that we would be interested in acquiring these assets at the right price."

Spirit, which was unavailable for comment, put Premier Lodge up for sale earlier this year after inheriting it as part of its £2.5 billion purchase of Scottish & Newcastle's retail arm.

The potential acquisition by Whitbread has already been given the green light by the Office of Fair Trading, which decided in May not to refer it to the Competition Commission.

Tuesday July 20, 2004