Mitchells & Butlers PLC
02 August 2007
Mitchells & Butlers Property Joint Venture
In view of the prevailing conditions in the debt markets, the Board of Mitchells
& Butlers has concluded that the joint venture proposal set out in the Company's
announcement of 22 May is unlikely to be achieved until debt markets have
Since 22 May, substantial progress has been made on structuring an attractive
transaction, with terms largely concluded with R20 (the investment vehicle of
Robert Tchenguiz), based on the sale of a 50% stake in a £4.5bn property joint
venture comprising approximately 1,300 pubs and £240m of rent. Until the current
market turbulence, Mitchells & Butlers and R20 have been in final negotiations
with banks to finance the transaction. However, the Board believes that it is
now not possible to execute the joint venture due to the current disruption of
the debt markets which has resulted in a significant widening of credit spreads.
The Board continues to believe that such a joint venture structure would be the
most advantageous method of releasing substantial value from the property
portfolio for shareholders, whilst preserving the integrity of the proven
business model. Discussions are continuing with R20 to enable the transaction to
be implemented subject to debt markets improving.
To increase the probability of a successful transaction, Mitchells & Butlers and
R20 separately entered into a number of debt hedging arrangements intended to be
contributed to the joint venture in order to protect against potential increases
in long term real interest rates. Due to recent market movements, Mitchells &
Butlers' share of these hedges, if valued on a mark-to-market basis as at 31
July, would have a post-tax deficit of approximately £60m. These hedges together
would be used to underpin the financing of any joint venture.
A further announcement will be made as appropriate.
Like-for-like sales for the 11 week period up to 28 July were up 3.5% on a same
outlet basis and up 2.2% on an uninvested basis.
Although these results are, as expected, partly assisted by weaker comparatives
within the Restaurant Division as a result of last year's World Cup, they
represent a resilient performance during a period of prolonged poor weather
conditions. The underlying sales trajectory reflects a continuation of the
consumer spending trends reported at the Interim Results on 22 May.
The first weeks of the smoking ban in England have seen minimal discernable
impact on the overall sales trend, despite the sharply differing weather
comparatives against last year. There has been a marginal movement in the sales
mix towards food but this will also have been weather related. At this time, it
is too early to draw any definitive conclusions from the limited period of the
ban so far.
Overall, trading remains in line with the Board's expectations.
For further information please contact:
Erik Castenskiold 0121 498 4907
Kathryn Holland 0121 498 4526
James Murgatroyd (Finsbury Group) 0207 251 3801
Amanda Lee (Finsbury Group) 0207 251 3801
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 of three times the industry average.
- Same outlet like-for-like sales include the sales performance for the
comparable period in the prior year of all managed pubs that were trading
for the two periods being compared. 85% of the estate is included in this
- Uninvested like-for-like sales include the sales performance for the
comparable period in the prior year of those managed pubs that have not
received expansionary investment of more than £30,000 in the two periods
being compared. 75% of the estate is included in this measure.
This information is provided by RNS
The company news service from the London Stock Exchange