M&B postpones £4.5bn property joint venture

Mitchells & Butlers (M&B) has announced that it has postponed its proposed property joint venture with Robert Tchenguiz due to concerns over the current state of the debt markets.

The company said that substantial progress had been made with R20, Tchenguiz's investment vehicle, towards the transaction, which would see approximately 1,300 of M&B's pubs and £240m of rent placed in a property joint venture worth £4.5bn.

M&B said that until the current market turbulence, the two companies had been in talks with banks to finance the transaction.

However, it said: "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 company said it was working with R20 to enable the deal to go through when debt markets improved.

The group also said that to increase the probability of a successful transaction R20 and itself had separately entered into a number of debt hedging arrangements, which are intended to contribute to the joint venture, in order to protect against potential increases in long-term real interest rates.

M&B's share of theses arrangements as at 31 July would have a post-tax deficit of approximately £60m.

Shares in M&B dropped 33.5p to 748p yesterday.

The company said that like-for-like sales for the 11 weeks to 28 July increased 3.5% on a same outlet basis and 2.2% on an univested basis.

The group said that the figures represented a "resilient performance during a period of prolonged poor weather conditions".

It reported that the smoking ban had had a minimal impact on the overall sales trend in its first few weeks of enforcement, with a marginal movement in the sales mix towards food.

The company said that overall, trading remains in line with its expectations.