M&B pubs under threat as Piedmont tightens its grip

The future of a number of Mitchells & Butlers pubs across Britain is under threat following last week’s hostile AGM which saw a group of rebel shareholders oust chairman Simon Laffin and replace him with John Lovering.

One of Lovering’s first acts as chairman was to announce a full review of the business and its outlets, to be presented to shareholders by the end of March.

As reported previously by Finance on Friday, the campaign to oust Laffin was led by Joe Lewis, whose Piedmont investment firm owns 23% of M&B. Lewis alleged that Laffin and his team should have been delivering a far better performance, criticising in particular their failure to increase the pub group’s margins.

While many smaller shareholders supported Laffin, the dissenters’ camp was strengthened by the heavyweight vote of Elpida, owned by Irish investors JP McManus and John Magnier, which has a 17% stake in M&B.

Concerns have been raised about the balance of control within the pub group as three new board directors, all proposed by Piedmont, were appointed: Simon Burke, former chairman of Hamleys, Michael Balfour, founder of Fitness First, and Jeremy Blood, former executive at Scottish & Newcastle.

In a further shake-up, the larger shareholders also voted against the reappointment of non-executive directors Tony Bates and Drummond Hall. This means that five of the eight directors on the M&B board have been nominated directly by Piedmont, with backing from Elpida.

With around 2,000 pubs across the UK, including the All Bar One, Harvester and O’Neill’s chains, this M&B power struggle has attracted the attention of politicians as well as investors.

Liberal Democrat shadow chancellor, Vince Cable, has written to the FSA and backed an early day motion tabled by John Grogan MP, chair of the all-party beer group. This motion raises concerns about the potential threat posed to the interests of M&B’s 60,000 small shareholders and 40,000 employees.

Grogan said: "M&B is our largest managed pub company with a history going back many years. When pubs across Britain are fighting for survival I want either M&B management to be able to concentrate on developing the group, or for these people in the background to make a bid. But the uncertainty is not doing anyone much good."

Piedmont has denied any plan for a takeover, saying “We have never sought control of M&B either on our own or with others.”

As the dust settled after the AGM, Lovering, formerly chairman of Debenhams, outlined his plans for restoring confidence among M&B shareholders, promising: “We will conduct a thorough review of the business which will be presented to all shareholders by the end of March.

“We will look at all aspects of the business: the number of brands and their positioning; the efficiency and allocation of capital expenditure; and the level of overhead costs within the business.”

It seems the market has confidence in the ability of this new board to fulfil many analysts’ optimistic predictions for the pub group. By the start of this week the company’s share price had recovered from its sharp dip in the run-up to the AGM, climbing back up to 280p.

Gabriel Savage, 02.02.2010