The bar is lowered for £2.5bn sale of Mitchells & Butlers
More than £60m in bankers' fees has been trimmed from the mooted £2.5bn sale of Mitchells & Butlers, the pubs-to-restaurants operator, paving the way for a private equity purchase.
Typically, listed companies are loaded up with bank debt, which has to be refinanced under "change of ownership"' rules. Fees on this are usually around 2 per cent of the amount refinanced, though it could be more at the moment given the weakness of the debt markets.
A leading leisure analyst estimates that Mitchells & Butlers has about £2.9bn of debt, but this has been securitised against its property portfolio. This type of debt does not carry the same change-of-ownership stipulation.
A source said: "There are securitisation notes held by a range of banks. They are securitised against the underlying assets – Mitchells & Butlers is real estate intensive."
The saving will help the private equity bidders – which include a Blackstone/CVC joint approach and Cinven – to finance a deal. Private equity has been struggling to raise debt and an industry source said it would help make the numbers for an all-cash offer.
The leading trade contender is Punch Taverns, which wants to create a £4bn market leader.
Mitchells & Butlers is now undertaking a strategic review, which sources believe will lead to a sales process kicking offin May. At least three prospective bidders have signed confidentiality agreements with Mitchells & Butlers, which is being advised by Citigroup and Greenhill.
Robert Tchenguiz, the Iranian property tycoon, is the company's biggest shareholder with a 23 per cent stake. Pubs are a favourite investment for Mr Tchenguiz, who also owns the Laurel Pub Company. However, he is considering selling up to 100 underperforming pubs in this portfolio.
A spokeswoman for Mitchells & Butlers declined to comment.
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies