M&B taps shareholders for £350m as pub revenues dry up

Mitchells & Butlers, the UK’s largest listed pub company, has said it plans to raise £350m through a share placing in a move that in effect puts its largest shareholders in control of the company.

The announcement of an open offer to the group’s shareholders on Monday came as the pub sector warned of mass closures and redundancies and urged the government to confirm when pubs could reopen following the current lockdown.

M&B, which owns the Harvester and All Bar One brands, would offer 167m new shares at a 36 per cent discount to Friday’s closing price in an attempt to “provide the business with the certainty of funding that it needs”, said Bob Ivell, the group’s chairman.

Shares in the FTSE-listed company were up more than 4 per cent in morning trading.

M&B is spending between £35m and £40m a month with its 1,700 pubs closed as well as £50m in debt repayments per quarter. The group is the largest UK-listed pub operator by number of venues.

The offer will be fully underwritten by three of M&B’s largest shareholders — the businessman and Tottenham Hotspur owner Joe Lewis; Elpida Group, which is backed by two horseracing magnates; and Smoothfield Holdings, the vehicle of the currency trader Derrick Smith. The three know each other through business dealings in Barbados and have four representatives on M&B’s board.

To back the offer, the three shareholders have formed an entity called Odyzean, registered in the British Virgin Islands, which will own 55 per cent of M&B’s shares.

Odyzean said that it planned to review the make-up of the pub company’s board with an eye to reducing the number of independent directors and planned to work with M&B’s management to ensure “that the time and cost devoted to public company matters are reduced”.

M&B said that the placing had been approved by the UK’s Takeover Panel and was not in contravention of a rule that stipulates investors with a shareholding of more than 30 per cent must make a bid for the whole business.

The pub company has also negotiated a new £150m bank facility and agreed waivers on its current debt financing with lenders.

Greg Johnson, an analyst at Shore Capital, said that M&B had been outperforming the rest of the pub sector pre-coronavirus and the additional fundraising should give the group two quarters worth of liquidity.

“Raising that additional liquidity should mean that it’s not strapped for cash when it reopens, so it should be able to reinvest in its estate where maybe some of the weaker and independents will find themselves constrained,” he said.

The British Beer and Pub Association said on Friday that “thousands of pubs and hundreds of thousands of jobs continue to hang in the balance whilst we wait for clarity on exactly when and how pubs reopen”.

Figures from the trade body show that beer sales in pubs fell 56 per cent in 2020 — a fall of £7.8bn — while gross domestic product figures published by the Office for National Statistics on Friday showed that the food service sector, which includes pubs, contracted 48 per cent last year.

After UK prime minister Boris Johnson hinted at the weekend that hospitality venues would open after other sectors of the economy, Tim Martin, chairman of the pub chain Wetherspoon, called for the government to reopen pubs at the same time as non-essential shops as the industry was “on its knees”.