The owner of Harvester restaurants and Nicholson’s pubs plans to raise £350m from a group of tycoons known as the “Sandy Lane set” after it came close to breaching the terms on its debts.
Mitchells & Butlers said it had agreed the equity raise with three investment holding companies as part of a £500m rescue package that also included a £150m three-year loan facility.
The rescue investors include the currency trader Joe Lewis, the Irish billionaires and horse racing tycoons John Magnier and JP McManus, and Derrick Smith, another businessman with horse racing interests. They are known collectively as the “Sandy Lane set”, after the glamorous Barbados hotel where they liked to gather.
The investors will merge their various investment vehicles in one company, called Odyzean, in a structure that will give them majority control.
The tightening of the investors’ grip comes with Mitchells & Butlers struggling during the latest national coronavirus lockdown in the UK. In January, the group, whose brands also include All Bar One, O’Neill’s and Toby Carvery, said all of its sites were closed and that it was left with only £125m of cash. It owns 1,600 pubs, bars and restaurants and employs 40,000 people in the UK.
At the same time, the company was burning through £35m to £40m a month and was due to make a debt payment of £50m on 15 March.
In 2010, the same investors were the subject of an inquiry by the Takeover Panel after Mitchells & Butlers complained they were working together to take control of the company without making a formal bid. However, Mitchells & Butlers said it had consulted the Takeover Panel, who had said no formal bid was required and that Odyzean was free to buy more shares.
The new shares will be issued at 210p per share, a steep 36% discount to Mitchells & Butlers’ closing share price on 12 February.
The share price had hit a five-year high above 420p shortly before the Covid-19 pandemic struck the UK. The FTSE 250 company was valued at £1.4bn on Friday.
Bob Ivell, Mitchells & Butlers’ chairman, said: “Mitchells & Butlers was a high-performing business going into the pandemic and this capital raising and refinancing will provide the business with the certainty of funding that it needs in order to emerge in a stronger position.”