Mulcahy keeps his wallet closed

KINGFISHER chief executive Sir Geoffrey Mulcahy is not using any of his own money to buy Kingfisher shares, although he is asking shareholders to stump up £2bn for a rights issue to help finance the purchase of French DIY business Castorama.

The deal will also result in a whopping £2.6bn goodwill writedown that will push Kingfisher into a pre-tax loss this year.

The prospectus reveals that neither Mulcahy nor electricals boss Jean-Noel Labroue are subscribing in full for the one-for-one share issue. They plan to sell part of their rights and use that money to buy the shares, rather than paying out any new cash.

Shareholders are offered one new share at 155p for every share they already own. Analysts say it makes sense for investors to buy the shares if they can afford it, because the price was set at a massive 50% discount. It would cost Mulcahy, who owns 655,000 shares, £1m to take up his rights.

Mulcahy, 60, is stepping down as chief executive when a replacement is found. Similarly, Labroue will no longer work for Kingfisher if the plan to demerge the electricals division goes ahead.

But shareholders may wonder why they do not see Kingfisher shares as a good investment. Kingfisher fell 3 1/4p to 226p, down from 310p since Friday, reflecting the extra shares in issue. The rights issue will cost Kingfisher £41.25m in bank and underwriting fees.