Mitchells and Butlers’ top shareholders unite in £350 million raise for pub chain

Major shareholders in All Bar One owner Mitchells & Butlers (M&B) have joined forces to ensure Britain's largest listed pubs chain gets the cash injection it needs to ride out the Covid-19 pandemic.

Horse-racing tycoons John Magnier and JP McManus, Tottenham Hotspur owner Joe Lewis and trader Derrick Smith have consolidated their holdings in the FTSE 250 firm into a new entity, Odyzean. The consortium has said it is able to make the whole £350 million sum sought by M&B available.

M&B said today that it will issue about 167 million new ordinary shares with a subscription price of 210p per share — a discount of around 36% on the firm’s share price at last close. All existing shareholders will have the opportunity to participate at that price.

The pub giant, which also owns the Toby Carvery and Harvester chains, reported crashing to a pre-tax annual loss of £123 million in November, down from a profit of £177 million in 2019. The latest lockdown is seeing cash burn of £35-£40 million per month.

M&B also said that it has secured an agreement with its banks for a new £150 million three-year loan, as long as the share placing completes.

The joining of the major investors' Piedmont, Elpida Group and Smoothfield vehicles gives Odyzean a 55% holding in M&B, which went into the pandemic as one of the largest and strongest listed firms in the hospitality sector and has seen its shares rise by around 50% this calendar year on vaccine and reopening hopes.

Odyzean’s preemptive open offer has already been approved by City regulator The Takeover Panel despite the entity newly holding more than 30% of voting rights in M&B - a situation that would traditionally mean it would have to make a takeover offer to other shareholders.

Under the terms of the open offer, Odyzean will also able to buy further shares without having to make a takeover bid. They will be able "to apply under the excess application facility for all of the open offer shares that are not taken up by other shareholders". 

Odyzean said it is making the offer to fully underwrite the £350 million raise "in order to address the significant capital needs of M&B and to provide a clear and consistent framework for the consortium’s future relationship with the company".

M&B has a 12 person board, and Odyzean said on Monday that it intends to review the board's make-up and look to "streamline decision-making... which may result in a reduced level of independent non-executive representation in the future".

It added that the consortium intends that "time and cost devoted to public company matters are reduced".

Odyzean said: “Without this major equity injection, the prospects for the business, its 1,600 venues, and over 40,000 UK employees would be bleak.”

M&B chairman Bob Ivell, Chairman of Mitchells & Butlers said: "We are pleased to have received the support of our major shareholders and key creditors."