Breaking pre-market news on Tuesday,
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To the Said Business School, Oxford, to hear departing Cadbury chairman Roger Carr talk about hostile takeover bids – a timely address, given the Kraft deal…
Carr, we can report, had clearly topped up on the theobromine ahead of his speech. Treating his audience to an insider’s view of a genuine transatlantic takeover battle, which he “won” by virtue of extracting 850p a share, Carr proceeded to recommend a range of rule changes to The Code, the City’s cherished but non-statutory takeover rulebook. To wit: Read more
The boardroom row at UK pub operator Mitchells & Butlers escalated on Tuesday when M&B appointed a chairman over opposition from Joe Lewis, its biggest shareholder with a 23% stake, and called on both his board representatives to quit. Following a board meeting on Monday night, M&B said it had resolved to appoint Simon Laffin, current senior independent director, as chairman with immediate effect to succeed Drummond Hall, who is retiring.
The coleslaw and kidney beans are starting to fly at the owner of the Harvester restaurant chain.
On Monday morning, Mitchells & Butlers, which owns All Bar One and Toby Carvery, decided to go public and bring to the attention of shareholders the recent manoeuvrings of Piedmont Inc., an investment vehicle controlled by billionaire currency trader Joe Lewis. Read more
Mitchells & Butlers is battling to regain investor confidence after the UK pub operator announced the departure of its long-serving chief executive following further losses over an abortive property deal two years ago. Tim Clarke, who has headed the group since 1995, resigned after M&B was forced to take a £69m hit to close out interest rate swaps related to the property venture. The new loss adds to an earlier £386m loss incurred from the hedge and has raised questions about whether the market had been properly informed about the hedge’s potential risks.
Robert Tchenguiz, the UK-based property entrepreneur, lost £1bn in just 24 hours after being forced to offload his stakes in J Sainsbury and Mitchells & Butlers as the fallout of the Icelandic banking crisis hit corporate UK. Tchenguiz lost up to £600m on the sale of a 10% holding in the UK’s third-biggest supermarket chain and about another £400m on his exit from the pub company. Tchenguiz was forced to sell down a 25.7% stake in M&B on Tuesday night as his financial backer, investment bank Kaupthing Singer & Friedlander, scrambled to sell assets and scale back its loan exposures. Kaupthing, which had bankrolled Tchenguiz’s move this year to turn his derivatives holding in the pub chain into shares, called in the loan. It was unclear whether he had sold the shares on to another party or whether his holding had been caught up in the administration process for KSF, an arm of Icelandic bank Kaupthing. KSF, now under Ernst & Young’s control, spent much of Wednesday morning attempting to place 180m Sainsbury shares for 250p with institutional shareholders. It was unclear whether this had been successful.
UK-based property tycoon Robert Tchenguiz has sold his 25% stake in UK pub group Mitchells & Butlers, illustrating how the financial crisis in Iceland is hitting UK companies. Some 101m shares in the group changed hands on Tuesday night after the formal close of business in London at 130p apiece, compared with a market price of 163p, which had already fallen 12% during the day. Although the stake is understood to belong to Tchenguiz, the actual seller was Iceland’s Kaupthing, which was holding the shares as collateral. The Icelandic bank is one of Tchenguiz’s financial backers and bankrolled his move in July to convert his derivatives holding of 25% into shares in order to stop it being lent to those betting on price falls. But with Icelandic banks being forced to deleverage, Kaupthing has called back the loan it gave to Tchenguiz, who was forced to liquidate his position to raise money. The buyer of the stake was not immediately clear. Shares in M&B are down 74% over the past 12 months and have fallen 25% in the past week. Following Tuesday night’s transaction, Tchenguiz still retains an economic interest of 4.8% in M&B through contracts for differences. More detail on FT Alphaville.
Who said this emergency was just about banks?
Pubs appeared to be have been forced into the toxic mix on Tuesday night as a huge line of Mitchells & Butlers was suddenly on the move. Some 90m shares in the All Bar One operator changed hands after the formal close of business in London at 130p apiece. That compares with a market price of 163p, which had already fallen 12 per cent during the day. Read more
Property tycoon Robert Tchenguiz on Thursday moved against short-sellers in UK pub group Mitchells & Butlers, converting a derivatives holding of almost 26% into shares in order to stop it being lent to those betting on price falls. The move is the latest effort by an investor to limit short-selling as tumbling share prices reinforce claims that shorting is partly to blame. Short-selling – a common hedge fund practice – is already in the sights of regulators amid fears that aggressive shorting contributed to the failures of Bear Stearns and Northern Rock. Tchenguiz has ordered his broker not to lend out stock, making it harder for short-sellers who want to borrow M&B shares to sell and buy back more cheaply.
The latest on Friday,
- Mitchells & Butlers said it is not in talks about an offer for the company, but is continuting discussion with private equity investors about a stake sale of up to 29.9 per cent – statement.
- Nomura, Japan’s largest brokerage, posted a fourth-quarter loss of Y153.9bn as revenue slumped and it had to cut the value of mortgage-related securities – statement, Reuters.
- Aviva’s Asia CEO says the business is not for sale, as the UK insurer announces results – Reuters, Aviva results statement.
- SCi plans to raise £60m through an equity placing and sale, issuing 171.6m new shares at 35p. Warner Brothers Home Entertainment has agreed to take £15m of the new stock – statement. Read more
The board of Mitchells & Butlers is set to come under renewed shareholder pressure after UK pub operator Punch Taverns abruptly ended all contacts with its rival. The move comes after weeks of potential merger offers and counter-proposals from the two pub groups that have become increasingly hostile in their dealings with each other. Punch is expected to announce Friday that it believes any deal with M&B is no longer in the interests of its shareholders. However, in an unprecedented move, it will also reserve the right to make a new bid within six months if there is a change of management at M&B.
Punch Taverns is facing pressure from a leading investor to sell Spirit, its managed pub estate, to rival pub operator Mitchells & Butlers in a deal worth a possible £1.8bn or more, reports the FT. QVT Financial, Punch’s fourth largest shareholder with a near 9% stake, said it would support M&B’s bid for Spirit over Punch’s earlier offer to buy all of M&B. M&B – under pressure to demerge its property portfolio – revealed it might consider selling a minority stake to buy-out groups and use the money to buy Punch’s 896 Spirit-managed pubs. The Times meanwhile reports that John Dunsmore, outgoing chief of Scottish & Newcastle, has been sounded out about the possibility of running M&B in the event of a merger with Spirit Group.
Buy-out groups CVC and Blackstone have submitted a joint proposal to acquire 29.9% of Mitchells & Butlers, the troubled UK pub group whose shares have tumbled after a property deal backfired, reports The Times. The FT reports that M&B bucked gloomy analyst predictions with a better than expected first-half trading update on Wednesday. M&B, which announced a strategic review in February, is understood to be talking with buy-out group Permira, as well as with the CVC/Blackstone team. Tim Clarke, M&B’s chief executive, said the conclusions of the review would be announced with interim results on May 20.
Mitchells & Butlers will discover Friday which private equity groups, if any, are willing to take up its offer of partial stakes in the UK pubs group, having all but given up on the prospect of an outright cash offer. A deadline of Friday has been set for bids, with a bid from M&B’s rival Punch Taverns of a 50-50 merger plus £175m cash payment the only tangible offer on the table. Bidders have been told they can explore all options for the company, the operator of the All Bar One and Harvester chains, and not just a full bid. Despite initial interest from some private equity groups, several have now withdrawn.
Punch Taverns could still team up with a private equity partner to make a joint bid for rival pub group Mitchells & Butlers, despite having launched its own offer for the rival pub operator. Informal discussions have taken place between Punch and a number of other interested parties, which include private equity groups Blackstone, CVC and KKR, though no firm arrangements have yet emerged. Punch is still working on its own solo offer, launched Feb 4, for a 50-50 merger with M&B, including a £175m cash payment to M&B shareholders.
Prospective bidders for Mitchells & Butlers, the UK pub and restaurant operator, are negotiating over confidentiality agreements, which will stipulate whether they will be allowed to launch joint bids for the company. M&B, which is being advised by Citigroup and Greenhill, is understood to have sent the confidentiality agreements to three prospective bidding teams last Friday in an attempt to kick-start a formal auction. However, Punch Taverns, CVC and Blackstone, and Cinven, which all received the letters, want to stay flexible at such an early stage.
The list of suitors for All Bar One operator Mitchells & Butlers – real or imagined – gets ever longer.
Punch Taverns has made no secret of its takeover ambitions, Robert Tchenguiz still has 23 per cent after the failure of his property joint venture with M&B, the Coolmore mafia has a stake, and leisure entrepreneur Trever Hemmings, who has his own 600-strong pub chain, also has a 3 per cent holding. Read more
Punch Taverns’ offer to merge with Mitchells & Butlers to create the UK’s largest pub operator, with more than 10,000 pubs, received a cool response from inside the rival company, as shareholders and advisers prepared for a drawn-out battle. The offer revealed by Punch on Monday would see shareholders of each company receiving half the shares in the new company, which would have an enteprise value of £11bn, including debt. Punch is also offering M&B shareholders a sweetener of £175m in cash, equating to 43p a share. M&B said it would look at the proposal along with other expressions of interest it had received. But insiders at M&B, which last week announced a strategic review following a £391m loss from closing hedges related to a failed property transaction, described the Punch offer as “not very appealing” and pointed to prospects for counter-bids from private equity firms. Lex says M&B shareholders may feel they have little reason to hope for better days to come. Still, the prospect of new management may have stronger appeal than a new owner.
British pub operator Punch Taverns has approached Mitchells & Butlers with an all-share offer that would create the UK’s biggest pub group with more than 10,000 outlets and a combined value of more than £9bn, including debt. Goldman Sachs, Punch’s adviser, on Friday sent a detailed proposal to Roger Carr, chairman of M&B. Punch is expected on Monday to inform the market of its approach. The offer comes after M&B last week revealed it had closed financial hedges connected to an ill-fated property venture at an after-tax cost of £274m, triggering intense criticism from shareholders. Under Punch’s proposal, M&B shareholders would get half the company and a cash sweetener of about £175m. The deal could generate synergies of about £90m by taking out M&B’s central costs. Punch is suggesting Tim Clarke, M&B’s chief executive, become non-executive chairman of the enlarged group. Punch’s finance director, Peter Crawdron, would become deputy chairman and Giles Thorley, chief executive, would take the same role in the merged company.
The future of UK pub group Mitchells & Butlers could be come down to a bid battle between Punch Taverns and a private equity group backed by Robert Tchenguiz, with the UK property entrepreneur preparing to take his stake in M&B to 29.9%. The board of M&B, which faced resignation calls from angry shareholders on Thursday, revealed Wednesday it had received tentative expressions of interest from various parties – including Punch and buy-out groups Apax, Cinven, CVC and Permira, say people close to the situation. These were made in the light of M&B’s decision to launch a strategic review in the wake of its calamitous £391m loss from closing hedging positions required to underpin a now-aborted property joint venture. Tchenguiz, whose R20 investment vehicle had persuaded M&B to enter the ill-fated joint venture, has a 23% stake in M&B, and is one of several investors wanting to see it extract value from its £5bn property portfolio. He has told M&B’s advisers he intends to raise his stake to the highest level possible before a bid is automatically triggered. Separately, the FT reports on M&B’s stormy annual meeting in which chairman Roger Carr apologised to outraged shareholders for the hedging debacle that swallowed two years of the pub group’s profits.
UK pub group Mitchells & Butlers revealed Wednesday it had received approaches from “a number of parties” after it announced a strategic review in light of its £391m pre-tax loss from a closed hedging position. The developments will intensify what was already expected to be a highly charged atmosphere at Thursday’s annual meeting. Punch Taverns is thought to be a likely suitor, although Giles Thorley, Punch’s chief executive, told analysts that Punch had not precipitated M&B’s statement. In its statement, M&B said there was no certainty that any discussions with possible buyers would take place. However, the company was now considered to be in an offer period, it said. An M&B insider said the statement might have been prompted by a request by the UK Takeover Panel for clarification about the strategic review. M&B shares surged 18% to 473p, valuing the company at £1.9bn. It also emerged that Robert Tchenguiz, the property entrepreneur, had lifted his holding by just over 1 percentage point to 23.1%, buying further contracts for difference through his family-owned Violet Capital Trust. Tchenguiz would now “sit and wait,” said one shareholder.
Shareholders criticised Mitchells & Butlers’ management on Tuesday after the UK pub group’s decision to close disastrous hedges at a post-tax cost of £274m. As the 2,000-pub chain announced a strategic review and the departure of finance director Karim Naffah, analysts suggested M&B could be a takeover target, possibly for rival operator Punch Taverns or private equity groups. Tim Clarke, chief executive, tendered his resignation but it was rejected by the board. Some shareholders blamed the company’s current vulnerability on the ill-fated property venture the board had lined up with Robert Tchenguiz, the property entrepreneur, which required both parties to set up interest and inflation rate hedges. The board acted precipitately in closing the hedges, they added. In a separate analysis the FT examines M&B’s disastrous position and asks, where does the blame lie? FT Alphaville’s Markets Live team meanwhile, has a range of theories . And Lombard says M&B should beef up its financial capability before trying anything like this again – or stick to pulling pints.
On Monday UK property investor Robert Tchenguiz upped his stake in Mitchells & Butlers by 3 per cent to 22 per cent, spending about £46m in the process. On Tuesday the pubs operator revealed a highly embarrassing £274m post-tax loss related to the closing out of hedges put in place as part of an abortive JV last summer with the very same property entrepreneur.
Somewhat ironically, before the losses were announced, one UK daily paper was suggesting that Tchenguiz’s purchase of a further 12m M&B shares, via contracts for difference, was motivated by a desire to see off speculation that he is in “dire financial straits”. And perhaps to reassert himself as having that magic investment touch? Read more
Having seen its earlier attempts at unlocking the supposedly hidden value in its property portfolio well and truly crunched in the summer, pub operator Mitchells & Butlers on Thursday confirmed it is looking at Plan B – use a real estate investment trust.
Prospects for a £5 billion-plus bid for Mitchells & Butlers were quashed last night by a statement from prospective bidder Punch, reports the Times. Punch said it was not in talks or even sounding out M&B shareholders. There have long been rumours that some sort of tie-up between the two parties would happen, but the timing is awkward for Mitchells & Butlers, which is considering whether to hive off its pub property assets into a real estate investment trust (Reit). This follows the collapse of a £4.5 billion property joint venture with Robert Tchenguiz. The entrepreneur, who speaks for 19 per cent of M&B, is tipped to be a key investor in the Reit.