British pub group, Mitchells and Butlers (LSE: MAB) complained to the Takeover and Mergers Panel claiming a number of its large shareholders are attempting to take control of the board. In a statement, Mitchells and Butlers said the actions of the Piedmont Investment Group (‘Piedmont’) threaten to undermine the independence and effectiveness of the Board ‘to advance the interests of a small group of shareholders’.
According to press reports over the weekend, Piedmont, the investment vehicle of Bahamian billionaire Joe Lewis is also supported by other rebel investors including Irish tycoons John Magnier and JP McManus who control the Elpida investment vehicle. Piedmont and Elpida own 23% and 17.5% of the issued share capital in Mitchells and Butlers respectively.
Mr Lewis bought the stake in the pub group from property mogul, entrepreneur and notorious stock market investor Robert Tchenguiz. The Piedmont investment group has two members on the board.
According to the pub company, Piedmont vetoed three independent candidates for the new independent Chairman at the final stage, despite having an active involvement in the selection process through a nominated representative.
Secondly, Mitchells and Butlers revealed that Piedmont requested the resignation of the group’s Senior Independent Director, Simon Laffin. The pub company said that the rebellious investors would vote against Laffin’s election in January’s AGM if he did not resign.
Mitchells and Butlers are continuing to work towards strengthening the Board through further independent appointments to succeed the Chairman, Drummond Hall. Last week the company revealed a robust operational performance in its final results for the year ended 26 September.
Over the full year, the group achieved like-for-like sales growth of 1.6% and total revenues increased 2.6%. Food and drink sales achieved like-for-like growth of 3.1% and 1.8% respectively.
However the pub company said regulatory and inflationary cost pressures led to a 12.5% fall in operating profit. According to Mitchells and Butlers, profitability in its retail operations improved in the second half of the year with the decline narrowing to a 2.4% decrease from 16.8% in the first half.
The cost pressures include food price inflation and increased duty on goods which have both impacted on margins. Mitchell and Butler’s gross margin was down 1.5 percentage points over the course of the full year. The pub group suffered £30 million in additional staffing costs relating to increases to the national minimum wage and £24 million in energy and supply costs.
The pub group supported cash flows with total site disposals of £72 million and the company said it has continued to generate strong operational cash inflows overall, while it reduced net debt by £135m over the full year.