Lewis tries to buy M&B ‘on the cheap’

12-Sep-2011 - Last updated on 11-Mar-2017 at 20:04 GMT

M&B: called on investors to reject the offer on the basis that 230p “significantly undervalues the company”

The Bermudan billionaire Joe Lewis has been accused of trying to buy Mitchells & Butlers on the cheap after indicating that his Piedmont investment vehicle is thinking about tabling a 230p bid for the 77% of the company he does not own.

Piedmont disclosed that an earlier proposal was turned down by the board. The 230p offer values the company at around £940m or just under £3bn including the net debt of £1.9bn.

The company called on investors to reject the offer on the basis that 230p “significantly undervalues the company”.
Piedmont was forced to make a statement at 6.22pm last night after market rumours of a possible bid had led to a 15.5p upward bounce in the company’s shares.

The statement from Piedmont said: “Piedmont confirms that it has presented a proposal to the board of M&B regarding a possible cash offer, with a partial share alternative, for the entire issued share capital of M&B which Piedmont does not currently own.”

It added that although M&B’s board has turned down the offer, it was now “considering” whether it will make a further offer proposal at 230p per M&B share.

The statement did not make it clear how much it offered, but M&B had made it clear there had been an earlier offer of 224p per share — M&B shares were trading at 361p each at their height at the start of 2011.

Observers claimed the approach required an investigation by the Takeover Panel as to whether there was a “concert party” at M&B between Joe Lewis and John Magnier and JP McManus, whose Elpida investment company holds a 20% stake in the business.

One source told M&C Report: “The offer comes as M&B is weakened with an interim chief executive and chairman and a below-strength board. The current share price reflects the current instability within the boardroom – it looks like Joe Lewis is trying to buy the company on the cheap.”

Some believe the situation at M&B now mirrors the position at Rank where the Malaysian tycoon Quek Leng Chan was able to use his 29% stake in the business to take control of the company.

The current boardroom situation at M&B is the latest episode in a five-year saga of instability.

Robert Tchenguiz built up a 22% stake in the business and was instrumental in persuading the company to pursue a split of its property and operational interests, which led to hedging losses of almost £500m. Lewis bought Tchenguiz’s stake in October 2008 for 130p a share after his bank Kaupthing forced a sale amid the depths of the Icelandic banking crisis.