LEISURE group Whitbread has agreed a £1.63bn deal to sell its 3,000-strong pubs and bars estate to finance house Morgan Grenfell Private Equity.

Whitbread put the estate, which includes at least 60 sites in the North-East, on sale in October to focus on its core hotels, food and leisure divisions - including Marriott Hotels and David Lloyd Leisure business.

The group said the deal represented a "very favourable outcome" for Whitbread's shareholders.

Chief executive David Thomas said: "We received an extremely high level of interest in the business."

Whitbread said the sale process began with about 30 players in the auction, which was whittled down to four, about a month ago.

Mr Thomas said: "Morgan Grenfell are buying this business because they consider it to be an excellent one which they can develop. We believe it will be good news for our pubs and bars division to have an owner that is totally focused on pubs and bars."

Graham Hutton, chief executive of Morgan Grenfell Private Equity, the buy-out arm of Deutsche Bank said: "We are delighted with this agreement.

"The pubs and bars division has an excellent portfolio of assets and we are confident that, together with management, we can significantly develop this business and create additional value in the future."

The other bidders in the race for the pubs and bars division - which employs up to 30,000 staff - were understood to be Japanese bank Nomura and venture capital group Candover.

Under the deal, the pubs and bars division will be demerged, following which Morgan Grenfell will pay about £1.13bn in cash to Whitbread.

The £445m balance of the value realised - after paying transaction-related costs - will be kept by Whitbread to reduce borrowings. Whitbread shareholders will get about 75 per cent of the net value received from the sale.

Whitbread has invested millions in converting former Swallow Hotels in the region to the Marriott brand. They include the Royal County Hotel, in Durham, the Seaburn Hotel, in Sunderland and the Gosforth Park Hotel, Newcastle.

Its leisure division is made up of its chain of David Lloyd Leisure clubs, which has a site at Thornaby, Teesside.