M&B manages to avoid a Footsie humiliation
Shares of Mitchells & Butlers have been in something of a ferment since they were floated on the stock market following the break-up of the old Six Continents empire. In less than three months they have moved between 199p and 245p, driven by a range of influences. At one time, when the shares were under pressure, Britain's largest managed pubs chain flirted with relegation from the Footsie blue chip share index. But a couple of powerful stockbroker recommendations, share buying by chief executive Tim Clarke, a former City drinks analyst, and, of course, the possibility that the group could collect more bids, strengthened the price. One interesting aspect of M&B's impressive share performance is that it increases the possibility of a successful shot at the 1,450 managed pubs that brewer Scottish & Newcastle has put up for sale. M&B is clearly interested in winning the auction. Indeed, if it loses it could be a sitting duck for a venture capitalist predator. So suffering the ignominy of being dumped from the prestigious Footsie club of the nation's top 100 shares would not have gone down well. It would have weakened the group's Scottish campaign and not helped its ambitions to undertake a £1.7bn securitisation of its estate. Footsie membership is based on a three-monthly check on a company's stock-market capitalisation. With only hours to go before the last calculation, M&B's share price was signalling relegation. Then Cazenove, M&B's stockbroker, took a hand. With immaculate timing it published a 24-page review, highlighting the group's attractions. Predictably the shares responded increasing M&B's capitalisation. Demotion was avoided. Caz's intervention raised a few City eyebrows. But it seems the blue-blooded stockbroker, which numbers the Queen among its clients, had, under City rules, been unable to publish any research until just before the Footsie deadline. It merely commented at the first opportunity. Still, there is no doubt Caz's toast did the trick. And since then, American-owned investment house Merrill Lynch has joined the hymn of praise. The main thrust of Merrill's comments, however, seems to be the group's vulnerability to one of the rapacious venture capitalists. But with the Scottish estate, M&B would look much more secure. It would embrace some 3,500 pubs a great many of them top-quality outlets. And its stock-market valuation would grow sufficiently, to banish fears of any future Footsie humiliation. I find very few companies are prepared to admit that Footsie membership is a status symbol that serves them well, particularly when negotiating deals. But there is no doubt that M&B's survival among the stock-market elite has strengthened its Scottish hand and made finding the necessary £2.3bn or so much easier. The other part of 6C, a former Footsie constituent, is doing well. InterContinental Hotels (taking in Britvic) is also a member of the exclusive club. Its shares have enjoyed an even more hectic stockmarket life than M&B moving between 326p and 458p. They are now around 440p. Not bad for a company deeply involved in the none-too-buoyant hotel market. Once again take over thoughts have had an impact. But I would not be surprised if Inter-Continental turned the tables and did a little bidding on its own account.
