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.

Barmaid pulling a pint
(Image credit: © Mitchells & Butlers)
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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”.

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Dr Matthew Partridge
Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri

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