M&B's slow growth leaves it open to offers

Mitchells & Butlers is suffering from slow growth. So it may not have the wiles to fend off Joe Lewis' advances...

by Dave Waller
Last Updated: 06 Nov 2012
M&B owns pubs like All Bar One, O’Neill’s and Toby Carvery, and has seen like-for-like revenue growth slow to 0.5% in the nine weeks to mid-September, after it rose 3.1% in the previous 42 weeks. Growth in food sales was particularly weak – down from 5.8% growth to 1.1% in the same period - while drink sales growth slowed from 1.2% to 0.2%.

Now that’s hardly going to be a huge surprise, given that the booze trade currently looks about as healthy as a woozy 18-year-old after a night swigging alcopops down the All Bar One. Indeed, shares have tanked 27% so far this year, thanks to what M&B describes as the ‘challenging’ UK consumer environment. It issued its worst trading update for years in July, and says it expects ‘cost pressures to remain next year’.

Given its poor condition, it’s hardly fit to defend itself against unwanted takeover interest from billionaire activist-investor Joe Lewis. The Bahamas-based currency trader is currently M&B’s largest shareholder, with a 22.8% stake built up since 2008, and he’s made his intentions very clear. It shouldn’t be too hard for him to sweet-talk the company up off the kerb and into the back of his metaphorical limo: Lewis already made an indicative offer earlier this month of 230p a share.

M&B’s interim chief exec Jeremy Blood felt his blood rising at that offer, arguing it ‘significantly undervalued’ the company. Blood reckons M&B has been ‘robust’ given the operating environment. Trouble is, that environment’s not about to change any time soon. Lewis apparently told friends that his stake would be better protected if the company was controlled by him. Worth £2.8bn, much of that on Black Wednesday, he’s not been shy of sticking his oar in at M&B. Last year he was embroiled in a boardroom scrap in which he blocked the appointment of three chairmen, before the company appointed one against his wishes and moved to shift his representatives from the board. As to whether it will be able to remain so firm, all become clear come kicking-out time…

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