2nd Aug 2007 07:02
Mitchells & Butlers PLC02 August 2007 Mitchells & Butlers Property Joint Venture In view of the prevailing conditions in the debt markets, the Board of Mitchells& Butlers has concluded that the joint venture proposal set out in the Company'sannouncement of 22 May is unlikely to be achieved until debt markets haveimproved. Since 22 May, substantial progress has been made on structuring an attractivetransaction, with terms largely concluded with R20 (the investment vehicle ofRobert Tchenguiz), based on the sale of a 50% stake in a £4.5bn property jointventure comprising approximately 1,300 pubs and £240m of rent. Until the currentmarket turbulence, Mitchells & Butlers and R20 have been in final negotiationswith banks to finance the transaction. However, the Board believes that it isnow not possible to execute the joint venture due to the current disruption ofthe debt markets which has resulted in a significant widening of credit spreads. The Board continues to believe that such a joint venture structure would be themost advantageous method of releasing substantial value from the propertyportfolio for shareholders, whilst preserving the integrity of the provenbusiness model. Discussions are continuing with R20 to enable the transaction tobe implemented subject to debt markets improving. To increase the probability of a successful transaction, Mitchells & Butlers andR20 separately entered into a number of debt hedging arrangements intended to becontributed to the joint venture in order to protect against potential increasesin long term real interest rates. Due to recent market movements, Mitchells &Butlers' share of these hedges, if valued on a mark-to-market basis as at 31July, would have a post-tax deficit of approximately £60m. These hedges togetherwould be used to underpin the financing of any joint venture. A further announcement will be made as appropriate. Current trading Like-for-like sales for the 11 week period up to 28 July were up 3.5% on a sameoutlet basis and up 2.2% on an uninvested basis. Although these results are, as expected, partly assisted by weaker comparativeswithin the Restaurant Division as a result of last year's World Cup, theyrepresent a resilient performance during a period of prolonged poor weatherconditions. The underlying sales trajectory reflects a continuation of theconsumer spending trends reported at the Interim Results on 22 May. The first weeks of the smoking ban in England have seen minimal discernableimpact on the overall sales trend, despite the sharply differing weathercomparatives against last year. There has been a marginal movement in the salesmix towards food but this will also have been weather related. At this time, itis too early to draw any definitive conclusions from the limited period of theban so far. Overall, trading remains in line with the Board's expectations. For further information please contact: Investor Relations:Erik Castenskiold 0121 498 4907 Media:Kathryn Holland 0121 498 4526James Murgatroyd (Finsbury Group) 0207 251 3801Amanda Lee (Finsbury Group) 0207 251 3801 Notes for editors: - Mitchells & Butlers owns and operates around 2,000 high quality pubs in prime locations nationwide. The Group's predominantly freehold, managed estate is biased towards large pubs in residential locations. With around 3% of the pubs in the UK, Mitchells & Butlers has 10% of industry sales, and average weekly sales per pub of three times the industry average.- Same outlet like-for-like sales include the sales performance for the comparable period in the prior year of all managed pubs that were trading for the two periods being compared. 85% of the estate is included in this measure.- Uninvested like-for-like sales include the sales performance for the comparable period in the prior year of those managed pubs that have not received expansionary investment of more than £30,000 in the two periods being compared. 75% of the estate is included in this measure. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Mitchells & Butlers