M&B's £400m mess

Mitchells & Butlers (M&B) finance director Karim Naffah has resigned after the company closed its controversial hedge position at a cost of about £400m before tax. The hedge position was taken out last summer in preparation for a joint venture property transaction with activist investor Robert Tchenguiz.

Chief executive Tim Clarke also offered his resignation, but the board turned it down because it was thought "in the best interests of the company that he should continue to lead the operational out-performance of the business".

An M&B statement said: "Management, supported by advisers and the board, acted professionally and diligently in the preparation of the financial package for the proposed joint venture with R20 and subsequent retention of the hedge, but fell victim to the global credit crunch which began in the midst of the final execution of the transaction."

Jeremy Townsend, M&B's deputy finance director, will be appointed to the board as finance director.

All executive directors, including Naffah, will forego their 2007 bonus awards in recognition of the large loss suffered by the company from the hedge closure.

Douglas Jack, analyst at Panmure Gordon, said: "M&B appears to be in a mess, but actually it is getting its house in order, albeit six months too late.

"The hedging loss has been closed, at £400m pre-tax, and the potentially disastrous opco/propco idea shelved."

Mark Brumby, analyst at Blue Oar Securities, said the hedge-fund situation was a "monumental, career-ending debacle of the first order".

"The cost is £274m after tax or circa £391m pre-tax, representing virtually 24 months of graft from the group's 43,000 employees. The chief financial officer has gone, the chief executive has tendered his resignation but is staying, and the chairman is glued to his seat - but it is hard to see how anyone associated with this catastrophe can stay with the company.

"The only thing that could compound this mess is if the management sell the company for the wrong price."