Mitchells & Butlers: the latest instalment
Gemma McKenna reports on the mood in the room at Mitchells & Butlers' volatile annual general meeting last week.
It bore all the hallmarks of an X-Factor final — hopeful stars, villains, a passionate audience of voters and press coverage aplenty.
But this was no TV contest, instead it was managed operators Mitchells & Butlers' much-anticipated annual general meeting at Birmingham's ICC last week.
Hundreds of ticket-holders, sorry shareholders, showed up anxious to get a good seat, yet demand was so high that some had to endure the somewhat less atmospheric overspill room, complete with video link-up.
Chief executive Adam Fowle even had to console one unhappy shareholder who complained he couldn't see the whole performance. Fowle's comment, "I'm sorry that you can't see us in the other room — we are all here," was met with giggles from audience.
M&B chairman Simon Laffin was greeted with warm applause, but looked nervous, as well he might, given the writing was on the wall with regard to his future. Later that day he was unceremoniously booted off the board by a two-thirds majority. Smaller shareholders were broadly supportive, if frustrated.
They were keen to know more about what happened to their dividend and why their money is being "squandered" paying former chief exec Tim Clarke a rather generous pension package.
Guy Jubb, a representative from Standard Life said the firm "could and should do better", though he welcomed the recent plans for growth, outlined by Fowle at the start of proceedings.
He slammed the activity of the rebel shareholders, saying: "As long-standing investors we've been dismayed by the approach taken by Piedmont.
"We are far from convinced that a total overhaul of the board would be in the interests of the company and its shareholders."
Another smaller investor praised M&B as "the best pub operator in the country." He went on to taunt the rebels, saying, "those shareholders who are not satisfied with the company's performance, I suggest you sell your shares and go and buy shares in Punch, or Wetherspoon's."
This was met with chuckles from his cohorts.
Disgruntled shareholders
The same shareholder called to mind the Barings Bank fiasco when urging directors to get on with business. "It's no use crying over spilt milk. We've had our Nick Leesons in the past. I think it was David Cameron who said, 'it's not where you've come from, but where you're going'."
Another disgruntled shareholder pointed out how the company has been rechristened in the press as "Muddle & Bluster", adding that the public slanging match between the board and rebel shareholders had come to resemble a bar-room brawl.
In the midst of it all, Fowle seemed determined to exert some authority over proceedings, as he primly reminded one speaker who was keen to have his five minutes of fame, "You're not in control of the microphone — I am, I'm afraid."
As criticisms rumbled on Mike Fisher, a small shareholder asked: "Could I attempt to inject a modicum of gravitas into the proceedings — or indeed petty, pathetic personalisations that have taken place in recent months — by asking the representative from Piedmont (billionaire Joe Lewis's 23% investment vehicle) to outline its prospective strategy for Mitchells & Butler should it gain control of the company?"
When no comment was forthcoming, he thundered on, "they're not prepared to tell the shareholders what they plan for the company — that says an awful lot about them." This was greeted with raucous applause from onlookers.
The applause continued for another investor who proclaimed: "I'm here because I'm disgusted at being a minnow, getting pushed aside by swaggering rich men who don't care about the company."
Ed Banks' take
The Simon Cowell-esque villain (reviled for his riches and attitude, but grudgingly admired for his business nous) was played by Ed Banks, a representative of 18% shareholder Elpida, owned by Irish racing magnates JP McManus and John Magnier.
A hush descended on the room as he took to his feet and pronounced that Elpida thought "shareholders have been let down".
He criticised the £500m in hedge losses saying, "this situation should never have been allowed to arise". He called for the "board to be held to account".
His words became deeds as they duly were — Drummond Hall, Tony Bates and Laffin were voted out.
Banks continued with his criticism: "We believe that they (M&B) are running a business where the cost base is too high. Revenue has increased every year for the last four years but operating profits have not."
He delivered the final blow with the line "Elpida does not want to control this company — we just want to see it run better".
His remarks were met with silence, save for a disbelieving whistle from one spectator.
When the dust settled and the votes were counted, it emerged that outgoing Debenhams chairman John Lovering had secured the shareholders' vote, to be joined by former Scottish & Newcastle boss Jeremy Blood, Mike Balfour and Simon Burke.
But will Lovering go the distance and unite the masses? Only time
will tell.
Who's in and who's out on the M&B board
Simon Laffin has been voted out of the Mitchells & Butlers (M&B) boardroom and has been replaced by John Lovering as chairman.
At the annual general meeting of the embattled managed pub group, only 34.4% voted for the reappointment of Laffin, who had been criticised by Piedmont, the investment vehicle of billionaire Joe Lewis. Also appointed onto the board were Jeremy Blood, Michael Balfour and Simon Burke.
The acrimonious shareholder battle at M&B started last year when Piedmont attempted to stop the appointment of Laffin. Piedmont rejected two other candidates. The board of M&B accused Piedmont of acting in concert with Elpida — the investment vehicle of racing tycoons JP McManus and John Magnier, who hold 17.6% — and reported the two parties to the Takeover Panel.
Since then the board of M&B and the rebel investors have been involved in a tit-for-tat argument over the corporate governance of the group. Shareholders at the AGM heard assurances from chief executive Adam Fowle, who reiterated the strategy for growth.
Outgoing chairman Laffin said the board had to act without "fear or favour" and encouraged shareholders to follow its guide to voting rather than grant Joe Lewis's investment vehicle Piedmont's, which owns 22% of shares, greater board representation.
Guy Jubb, head of corporate governance at major shareholder Standard Life, criticised the actions of Piedmont. He said: "As long-standing investors we've been dismayed by Piedmont's behaviour.
"We are far from convinced that a total overhaul of the board would be in the interests of the company and its shareholders. We shall support the board and urge other shareholders to follow suit."
In a statement to the meeting, Edward Banks, a representative of Elpida said: "We believe that the shareholders have been let down by the leadership." He added: "We believe that they are running a business where the cost base is too high. Revenue has increased every year for the last four years but operating profits have not.
"Notwithstanding the top line increase, operating profits and earnings per share — even ignoring all the exceptional losses — are both still below where they were in 2006. This is a business that has let costs get out of control."
Banks said the board had
"a poor track record with shareholders' money", citing the amount spent on a strategic review following the hedging debacle.
"They blew £12m on a strategic review that achieved nothing."
Comment by The PMA Team
Shareholder activism is a good thing, isn't it? In the event, the vote at last week's annual general meeting went overwhelmingly in favour of wholesale change in non-executive personnel in the M&B boardroom.
And no-one can say this was change for change's sake. Anyone who holds an M&B share has cause to be fed up with hundreds of millions of poun
