Mitchells & Butlers plans to raise £500m after drinking the bar dry

Pub group Mitchells & Butlers to raise £500m from a group of business tycoons by selling cut price shares worth £350m and borrowing another £150m.

Mitchells & Butlers (M&B), the owner of Harvester restaurants and Nicholson’s pubs, plans to raise £350m from a group of tycoons by selling shares at a third of the current price, says Jasper Jolly in The Guardian. The tycoons will also offer the company a £150m loan facility, bringing the total value of the package up to £500m. 

Currency trader Joe Lewis, Irish billionaires John Magnier and JP McManus, and businessman Derrick Smith (collectively known as the “Sandy Lane set”) will merge their investment vehicles into one entity, called Odyzean, giving them majority control of the company. The refinancing will “strengthen their hand”, says Bryce Elder in the Financial Times. Existing shareholders can’t sell the rights to buy the discounted shares on to third parties, as would be the case with a normal rights issue, leaving the Sandy Lane set to pick up any unsold shares. And with 55% of the shares, that means they can “dislodge independent management”. This is effectively a “coup” against smaller shareholders.

Analysts are already calling it a “nil-premium takeover” likely to lead to the company “going private under a ‘low-ball offer’ in the future”, says Ben Marlow in the Daily Telegraph. Still, even though the deal is bad for small shareholders, it’s hard to see what the alternative is, especially given that Mitchells & Butlers is now paying the price for “guzzling down £1.6bn in debt during the good times”. With borrowings “maxed out” and costs still running at £40m a month, on top of “a £50m interest bill to pay every quarter”, the bar has “almost been drunk dry”.

Recommended

Persimmon yields 12.3%, but can you trust the company to deliver?
Share tips

Persimmon yields 12.3%, but can you trust the company to deliver?

With a dividend yield of 12.3%, Persimmon looks like a highly attractive prospect for income investors. But that sort of yield can also indicate compa…
1 Jul 2022
Share tips of the week – 1 July
Share tips

Share tips of the week – 1 July

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
1 Jul 2022
Bunzl: boring is good for business
Share tips

Bunzl: boring is good for business

Food-service distribution company Bunzl is not a terribly exciting business, but it looks cheap and could be a great investment, says Rupert Hargreave…
30 Jun 2022
Five dividend stocks to beat inflation
Share tips

Five dividend stocks to beat inflation

During periods of high inflation, dividend stocks tend to do better than the wider market. Here, Rupert Hargreaves pick five dividend stocks for incom…
30 Jun 2022

Most Popular

Five dividend stocks to beat inflation
Share tips

Five dividend stocks to beat inflation

During periods of high inflation, dividend stocks tend to do better than the wider market. Here, Rupert Hargreaves pick five dividend stocks for incom…
30 Jun 2022
Don’t try to time the bottom – start buying good companies now
Investment strategy

Don’t try to time the bottom – start buying good companies now

Markets are having a rough time, so you may be tempted to wait to try to call the bottom and pick up some bargains. But that would be a mistake, says …
1 Jul 2022
UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022