Another leading City analyst has called on Mitchells & Butlers (M&B) to abandon, for now, its proposals to hive off its property assets into a separate vehicle, writes Paul Charity.
The company is considering moving its freehold properties into a Real Estate Investment Trust (Reit), a proposal tabled by activist investor Robert Tchenguiz’s R20 investment company, leaving M&B as an operating company.
Now Geof Collyer, of Deutsche Bank, has written a note expressing deep concern about the plan in the current climate.
He states: “We remain fundamentally concerned about the health of an operating company created by stripping out all of the property, and would see it as significantly more risky than any other pub group in the sector that we cover in the event of a consumer downturn.
“We remain long-term fans of M&B in its current structure, but the desire to strip out the property assets prevents us from being more positive.
“Until the outcome of the expected consumer downturn can be clearly determined, M&B and its shareholders would be better off rejecting the Reit or the property joint venture option.”
Surprisingly, Collyer goes a little further in counselling a firmer approach at M&B in dealing with Tchenguiz, who owns 19% of the company directly and through contracts-for-difference.
He writes: “If the split - separating a property portfolio that has taken over 100 years to build up - is the right thing to do, then it will still be the right thing to do once investors are reassured that the consumer decline has bottomed out and the operating company’s profitability hasn’t collapsed.
“If R20 and the other minority investors can’t wait that long, then let them table a formal bid for the group, or sell their shares.
“M&B could always do the split itself or with someone else - if the board decides to de-merge the property from the operating company.”
