In accordance with paragraph 9.6.1 of the FSA Listing Rules two copies of a letter and a revised proxy card, which are being mailed to shareholders today, have been submitted to the UKLA for publication through the Document Viewing Facility situated at:
Financial Services Authority
25 The North Colonnade
London E14 5HS
The content of the letter is reproduced below.
The Board's Recommendations on how to Vote at the AGM
The Company's directors wrote to you in December 2009 to explain the background to the events of the last few months and also the reasons why four non-executive directors were removed from the Board towards the end of last year. A copy of that letter is available online at www.mbplc.com/letter.
On 17 December 2009, the Company informed the market that it had received from Piedmont Inc., the Company's largest shareholder with a 22.8% stake, a request that four further individuals be considered for election to the Board at the forthcoming Annual General Meeting. Piedmont Inc. also proposed a resolution to remove Drummond Hall, the former Chairman, from the Board.
In the opinion of the Board the resolution to remove Drummond Hall, the former Chairman, from the Board has been made without any justification. Mr Hall intends to stand down as soon as a replacement independent non-executive director joins the Board. The Board wishes Mr Hall to remain as a director in the meantime. Piedmont's representative had previously also indicated that a ‘small number of large shareholders' would vote to remove Simon Laffin as a director. Piedmont's representative went on to add that he thought it better if in fact Mr Laffin did not stand at all.
On 4 January the Company informed the market that it had received a further communication from Piedmont Inc. requesting the appointment, under the terms of its contractual agreement, of Ron Robson to the Board as one of its two permitted shareholder representative non-executive directors.
The Board notes that substantial change in its composition has already occurred during the last twelve months, and that more is planned in the short term, with the forthcoming retirement of Sara Weller at the Annual General Meeting, and the planned departure of Mr Hall when a suitable replacement has been identified. Piedmont Inc. has also declined to confirm that it will support either Mr Laffin's or Mr Bates' reappointment. The Board does not believe that further wholesale change is likely to assist the executive team, which continues to do an outstanding job in running the Company's operations, as demonstrated by our Interim Management Statement released last week.
Should Piedmont Inc.'s proposed resolutions be passed, Piedmont Inc. would effectively have determined the composition of a majority of the Board, in nominating 5 directors (or if it exercises its right to appoint two further representatives, 6 directors) and in trying to remove both the previous and current Chairmen. This shareholder has also informed the Board that it would insist that Mr Lovering be appointed as the Chairman, both requiring Mr Laffin to stand down as Chairman and appropriating to itself a decision that should be solely for the Board to take. We believe that this is an inappropriate degree of control for a single minority shareholder to have over a properly constituted public company.
We have undertaken extensive negotiations with Piedmont Inc. over the last 9 months to try to find an accommodation on Board composition. This has been particularly intensive over the last month. The degree of demands Piedmont Inc. has been making is evidenced by a list of proposals sent on its behalf to the Board on 4 January, which we invite them to make public. The Board ultimately decided that accepting Piedmont Inc.'s demands would constitute permitting a single minority shareholder to have proposed or nominated a majority, or at least a substantial proportion, of your Board which the current directors believe is wholly inappropriate.
Below, the Board therefore sets out its firm recommendation of how you should vote. It outlines the position which would result if a majority of shareholders followed its advice, called the ‘Board Outcome'.
It also sets out the position which would result if a majority of shareholders supported Piedmont Inc.'s resolutions and voted against the reappointment of the existing directors up for re-election, described here as the ‘Piedmont Outcome'.
More specifically, the ‘Piedmont Outcome' shows the composition of the Board in the event that:
1) a majority of shareholders supported the appointment of Piedmont Inc.'s four nominees;
2) a majority supported Piedmont Inc.'s move to remove Drummond Hall;
3) a majority voted against the existing directors up for re-election, namely, Simon Laffin, Chairman, and Tony Bates, non-executive director; and
4) Piedmont Inc. exercises its contractual right to appoint a second representative director to the Mitchells & Butlers Board.
The ‘Board Outcome':
In the event that a majority of shareholders follow the Board's recommendations at the AGM, the composition of the Board would be:
Your Board considers that the ‘Board Outcome' would comprise a strong and balanced Board with appropriate representation given to a major shareholder. Further, the Board would expect over the next year to appoint a new independent non-executive director to replace Mr Hall, who has indicated his desire to stand down as soon as a suitable replacement joins the Board.
The ‘Piedmont Outcome':
This Board would be dominated by directors nominated by or representing a single minority shareholder. We do not believe that a Board constituted in this manner would necessarily be in the interests of all shareholders.
The Board's Voting Recommendations
We recommend that you vote in favour of the resolutions to appoint:
Tony Bates (resolution 3a)
Simon Laffin (resolution 3b)
Ron Robson (resolution 3c)
John Lovering (resolution 12a)
Simon Burke (resolution 12d)
We recommend that you vote against the resolutions to appoint:
Michael Balfour (resolution 12b)
Jeremy Blood (resolution 12c)
We recommend that you vote against the resolution to remove:
Drummond Hall (resolution 13)
Reasons for your Board's recommendations
The Board continues to assure to you that its central responsibility is to promote the success of the Company for the benefit of its shareholders, as a whole, and fairly as between each of them. Its overriding objective at the AGM is to ensure that the Company maintains a stable and well balanced Board of high quality directors with a majority independent of any allegiance or favour to any single shareholder or group of shareholders, in accordance with best practice corporate governance.
The selection of new independent directors should be a decision for the Board taken carefully, with independent specialist recruitment advice, and not under pressure or threats, nor undertaken hastily. This Board process was followed in the appointment of both Tony Bates and Simon Laffin, and we recommend them strongly to you based on their contributions to this Company since their appointments last year. Tony Bates is now chairman of the Audit Committee and Simon Laffin agreed to become Chairman of the Company at short notice and has since provided wise and strong leadership to the Board.
Ron Robson is a shareholder representative director for Piedmont Inc., and so is non independent. However the Board welcomes constructive shareholder involvement and interest in our business, and so looks forward to him making a positive contribution.
Simon Burke is a well-respected retailer and businessman and was shortlisted by the Board for the role of Chairman, until Piedmont Inc. decided that he did not have its support. The Board therefore welcomes his nomination, now supported by Piedmont Inc., and believes that Mr Burke could make a strong contribution as a non-executive director.
John Lovering has extensive experience in the retailing sector. Mr Lovering is currently Chairman of Debenhams Retail PLC although he has indicated that he will retire from that role at its next AGM. During the extensive negotiations with Piedmont Inc., Mr Lovering played an important role in seeking to reconcile the legitimate interests of the Company and its major shareholder. Throughout the discussions, Mr Lovering demonstrated his desire that a compromise should be reached. In the light of this, and following the nomination process, the Board has concluded that the appointment of Mr Lovering as a non-executive director would be in the interests of all shareholders.
Piedmont Inc.'s resolution to remove Drummond Hall has, in the opinion of the Board, been made without any justification. As Chairman, Mr Hall worked tirelessly for the Company in difficult circumstances, and in particular had tried extremely hard to find an accommodation on the question of the Board's composition with certain large shareholders. It is the Board's recommendation that Mr Hall remains a director until a suitable independent replacement can be found.
The Board recommends that shareholders vote against the appointment of Messrs Balfour and Blood, on the basis that one single shareholder owning just under 23% of the Company's shares should not be in a position to propose or nominate a majority of the Board. In its recommendation to you, the Board is making no comment about the personal qualities or independence of these individuals, and nothing should be implied about them, but is solely focusing on the composition of the resulting Board.
In addition, we recommend that you vote in favour of the other resolutions proposed by Mitchells & Butlers plc, as set out fully in the AGM Notice sent to you on 17 December 2009, as follows:
Your Board strongly urges you to vote in line with our recommendations.
This Company has a great portfolio of assets, a strong set of brands, and a highly skilled workforce delivering superior service to millions of customers. The Board believes that, through its strong and properly constituted Board structure and under its current Chairman, Simon Laffin, it can create sustained value for all shareholders by supporting the Company in its core task of managing and growing outstanding pubs and pub restaurant businesses, without further distraction from wholesale changes to the Board.
Why we need your support
We look forward to seeing you at the AGM on 28 January, and in the meantime we encourage you to use your vote by completing the enclosed proxy card or voting online at www.sharevote.co.uk as soon as possible. Please make every effort to vote. Every single vote counts.
If you have any queries regarding the AGM, the business proposed, the related documentation, or how to vote, please contact the free shareholder helpline on 0800 6888 166 which is now open from 8am to 8pm, Monday to Friday, until the AGM.
The Board of Mitchells & Butlers plc
Autobiographical details of persons nominated by Piedmont Inc. for appointment as directors
John Lovering is currently Chairman of Debenhams Retail PLC. He has been Chairman of Debenhams Retail since January 2004, and of the PLC since the flotation in May 2006. He will officially step down on 31 March 2010. Other current roles include Managing Partner at Lovering & Lovering and Partner at Echelon Investments LLP.
Previously, Mr Lovering was Chairman of Laurel Pub Company Limited, Fitness First Limited, Odeon Limited, Homebase Group Limited, Fired Earth Limited, Peacock Group, Somerfield Limited and Birthdays Group Limited. He also served as Finance Director of Sears plc and Chief Operating Officer of Tarmac plc.
Jeremy Blood was Managing Director at Scottish & Newcastle (S&N) from 2007 until May 2009 having been at S&N since 1988. He joined initially as Brand Manager for Beer Marketing. Subsequently he held various roles such as Sales & Customer Service Director, Strategy & Marketing Director, Director of Corporate Affairs and Managing Director for S&N Pub Enterprises.
Michael, a chartered accountant, was the founder of Fitness First which he grew from one club in 1992 to the largest chain of health clubs in the World with 530 clubs in 21 countries. Fitness First was floated on the London Stock Exchange in 1996. The Company was acquired by private equity in 2005 for £835m. Michael stepped down as Chairman in April 2009. Michael is currently Chairman and founder of The Hideaways Club, which is now Europe's largest private residence owners club. In 2008 Michael was awarded an OBE for services to business.
Simon Burke is currently Executive Chairman of Superquinn, Non-Executive Chairman at Majestic Wine and Chairman at National Gallery Co. Previous roles include Chairman at Total Home Entertainment (2003 - 2006), Executive Chairman at Hamleys Plc (2001 - 2003) and Chairman at Virgin Cinemas (1995 - 1999). Mr Burke started his career as a Chartered Accountant for Binder Hamlyn in 1976.
Ron Robson is currently Chief Financial Officer of Tamar Capital Partners, a property investment and management group owned by family interests of Joe Lewis. He was previously Group Finance Director of Kenmore, a property investment and management group. From 2005 to 2008 he was Group Finance Director of Belhaven Group plc, a listed brewing, drink distribution and pub retailing group. Prior to that he held a number of senior finance roles including Group Finance Director of a listed shipping and logistics group, and trained as a Chartered Accountant with Arthur Andersen.
*As Mr Robson will be appointed a director on 22 January 2010 he will not have been subject to a formal performance evaluation and the Company cannot provide the information required under paragraph A.7.2 of the Combined Code."
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Notes for editors:
Mitchells & Butlers owns and operates around 2,000 high quality pubs in prime locations nationwide. The Group's predominantly freehold, managed estate is biased towards large pubs in residential locations. With around 3% of the pubs in the UK, Mitchells & Butlers has 10% of industry sales and average weekly sales per pub almost four times greater than that of the average UK pub.
Mitchells & Butlers' leading portfolio of brands and formats includes Ember Inns, Harvester, Sizzling Pub Co., Toby Carvery, Vintage Inns, Crown Carveries, All Bar One, O'Neill's, Nicholson's and Browns. In addition, Mitchells & Butlers operates a large number of individual city centre and residential pubs.