Mitchells & Butlers shares tumbled by 18% at one stage this morning after an analyst's note suggested it may be short of cash.
The company fell as much as 62.5p, or 18%, to 290p as other pub sector shares slid. They had recovered to 318.50p by just after 10am. The company "has a very weak financial position" and "could require a cash injection," Lehman analyst Julian Easthope wrote in a note to clients. He dropped his share- price estimate to 235p from 450 pence, saying M&B may be forced to sell pubs, slash its capital spending, cut its dividend or ask shareholders for more money.
The company has been in play since it crystallised a £274m loss by closing a hedge linked to its aborted property deal with Robert Tchenguiz's R20. It is now looking at selling a minority stake to a private equity firm like CVC or Blackstone, the Sunday Telegraph claimed at the weekend. The private equity firms would provide a loan that would later convert into a stake in M&B.
The company began a review of its strategic options after it revealed hedge losses at the start of the year. Punch Taverns has already tabled a merger proposal. Punch said in February there was "substantial strategic rationale" in combining the two businesses, creating a company with more than 10,500 sites.
M&B's problems stem from an interest rate hedge it took out to protect a proposed joint venture property deal with Robert Tchenguiz against rising borrowing costs on its debt burden.