Pub and restaurant giant Mitchells & Butlers may have to shell out £300 million to pay its way out of a disastrous bet on interest rates, it was revealed today.
M&B, based in Birmingham but named after the brewing giant once based in Smethwick and Wolverhampton, bet against rising interest rates last summer as part of a £4.5 billion property deal.
But potential investors pulled out following the credit crunch - causing the plans to be shelved - and with interest rates now on the way down, the group may be forced to cut its losses. It is believed M&B chairman Roger Carr will have to tell investors at the company’s annual meeting on Thursday that losses on the unwanted hedge have spiralled to more than £300 million.
Mitchells & Butlers currently runs around 2,000 outlets including the All Bar One and Harvester chains. It has more than 30 pubs across the Black Country, from the Goose and Mermaid pubs in Wolverhampton and the King Arthur in Dudley to the Crown & Anchor in West Bromwich.
Mitchells & Butlers, which was today unavailable for comment, had planned to set up a debt-financed joint venture company with entrepreneur and major share holder Robert Tchenguiz, including approximately 1,300 pubs and £240 million of rent. The interest rate hedge was to protect the new company against rising borrowing costs on its debts.
But the controversial move, coming at a time when M&B’s profits are already under pressure from the smoking ban and slowing consumer spending, is likely to draw fire from shareholders in London on Thursday.
6 Comments
Brewery Companies callous treatment of their front line troops … Managers and Tenants evokes little sympathy of reports like these…………
As a former employee and current shareholder; this is not good news. Of course, this is the Company which fast tracked people with University degrees into Area Manager jobs (bypassing many who knew the trade).
They’d better not try and recoup their losses from InterContinental Hotels Group or all my shares will be worth nothing.
Many M&B Area managers have worked in the trade for years and have degrees so where that info came from I dont know. I know numerous people who work for M&B and they are big on promoting from within, some of the best area managers in the company have a degree and have run pubs.
I’ve seen Area Managers attempt to serve in a pub. It was at my ‘local’. They won a prize of a night off and Area Managers had to serve (role-reversal). Too busy braying among themselves to serve in a timely fashion. More froth than beer and beer passed over, fingers on the lip-line.
Watching someone do a job doesn’t make you qualified.
no i mean actually have run pubs for years before being an area manager just like many pub managers have degrees. The issues with the hedge fund has nothing to do with the operating company, that continues to out perform the market and has just posted a solid performance for the first 17 weeks to the city. This is what makes M&B such an attractive proposition to potential buyers is its managers ability and expertise. The credit crunch and hedge fund has nothing to do with the capability of its staff who year after year continue to deliver the best results in the sector. M&B is the best pub Co bar none and whoever does buy it will have the best people at their disposal. Lets hope they are treated right and the customer continues to be put first.
I sincerely hope M&B continues to perform well. Perhaps then I will re-invest my share dividends in M&B. Meanwhile we have the smoking-ban which is killing the trade. I come out of the pub on my (now rare) visits with my clothes stinking of vinegar and chip grease.