Investors fear M&B vote chaos

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The Independent Online

Two investor groups have added to the feverish atmosphere surrounding the battle for Mitchells & Butlers' (M&B) future, by urging shareholders to recall stock they had loaned to short sellers to avoid distorting a crucial vote next month.

The pub group faces a poll on the appointment of four new directors proposed by rebel shareholder Joe Lewis at its annual general meeting on 28 January. The National Association of Pension Funds (NAPF) and the Association of British Insurers (ABI) called the vote "critical" to M&B's future.

They urged their members "not to lend stock in the company ahead of this meeting and to recall any lent stock in a timely manner", because "it is possible that the voting result may be close".

Long-term investors lend stock for a fee to traders who are hoping to take advantage of short-term falls in the share price. The shares are then returned at a mutually agreed date.

The amount of stock on loan tends to be an indication of how likely a company's share price is to fall. Currently 7.4 per cent of M&B's stock is on loan, according to Data Explorers.

The ABI and NAPF have taken the "extremely rare" step of issuing the plea, to "avoid the risk of the voting result being distorted". The voting rights on a share transfer to the borrower following a lending agreement, and the two bodies fear January's result could be distorted by votes from parties "without an economic interest" in M&B.

This came a day after Mr Lewis's investment vehicle Piedmont, which owns 23 per cent of M&B, demanded the appointment of the four directors. M&B sent a letter to shareholders yesterday outlining its reasons for dismissing four directors in the past few weeks, saying it wanted to keep the board fully functioning and independent. The latest hostilities broke out in November when M&B asked the Takeover Panel to probe whether Mr Lewis was acting in concert with other shareholders.

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