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Shareholders on alert over Mitchells & Butler meeting

Investors in the troubled pub group look set to clash with its largest shareholder – Tottenham Hotspur owner Joe Lewis – in a row over the make-up of the board

City investors are expected to once again go to war with troubled pub group Mitchells & Butlers’ largest shareholders, led by billionaire currency trader Joe Lewis, at a meeting next week.

Two governance groups have homed in on concerns that a boardroom exodus has left the group, whose brands include O’Neill’s, Harvester and Toby Carvery, as the only FTSE 350 firm without any independent directors.

The board was reduced in July to just five men – two of them Lewis’ representatives – following the departure of chairman Simon Burke and non-executive director Michael Balfour.

Little over six weeks later Lewis approached the depleted board with a nil-premium takeover offer for the property-rich pub group. The bid was rejected but Lewis has continued buying shares, taking his stake to 25.6%.

The Association of British Insurers has issued a “red top” warning over the make-up of the M&B board where the only non-executives are Ron Robson and Doug McMahon, two representatives of Lewis’ investment vehicle Piedmont. The strongest possible alert has been sent out to all shareholders ahead of M&B’s annual shareholder meeting in Birmingham next Thursday.

Meanwhile, fellow governance expert Pirc has recommended shareholders voting against the re-election of Robson and McMahon. It has also advised investors to abstain on a resolution to elect chairman Bob Ivell to lead the company as executive chairman.

Ivell was summoned to meet key institutional investors over the summer at the ABI. They are understood to have stressed that they wanted him to restore an independent voice to the board as a matter of urgency. Ivell is believed to have given assurances that the matter was in hand. No independent directors have been appointed to the board since then.

Ivell has also failed to recruit someone to take over as M&B chief executive, a role he is assuming on a temporary basis.

Institutional investors are believed to be deliberating about whether to signal their displeasure at Ivell’s lack of progress on board appointments. Ivell is well regarded within the pub industry and led the board’s rejection of Lewis’ offer.

Some fear that a weakened Ivell would be less able to fend off another low-ball takeover approach from Lewis. The billionaire investor, best known in the UK as the owner of Tottenham Hotspur football club, could launch another bid attempt from April under takeover panel rules.

Institutional shareholder concerns about Lewis date back to 2009 when previous directors accused Piedmont of acting in an improper concert party with Irish investors – JP McManus and John Magnier – who are friends of Lewis. The takeover panel eventually ruled that there had been no rule breach but the allegations won almost unanimous support among institutional investors at the time.

Those who made the allegations were voted off the board by Lewis, McManus and Magnier at the next shareholder meeting. Since then, there has been a steady stream of director resignations and the only non-executive director appointed to the board has been Bob Ivell. Ivell is known to McManus and Magnier having served as deputy chairman of racquets club group Next Generation while they were leading investors in that business.

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