Martin Vander Weyer’s Any Other Business
If you don’t follow hospitality-trade news closely, you could be forgiven for thinking of Mitchells & Butlers as a Midlands-based brewery notable for its handsome Edwardian pubs. But it has not been that for decades, and if it was once an icon of progress in the beer trade, its name these days symbolises everything that’s depressing about modern corporate wheeler-dealing.
Let me simplify the history. The Smethwick breweries of Henry Mitchell and William Butler merged in 1898; their company’s heyday lasted until 1961 when, during a fever of consolidation across the industry, it merged into what became Bass Charrington. After Margaret Thatcher’s Beer Orders forced the break-up of ‘tied’ pub estates, the brewing arm of Bass was eventually sold to Interbrew of Belgium. That in turn became part of a giant multinational called (take a deep breath here) Anheuser-Busch InBev, which claims a quarter of the global beer market. The pubs and hotels side, meanwhile, became Six Continents plc, and the Smethwick brewery closed to become a housing estate. Finally, in 2002, the pubs — including chains such as Harvester, bought from Forte, and Beefeater from Whitbread — were demerged from Six Continents under the revived name of Mitchells & Butlers.
So that is the business you read about today: the operator of 2,000 watering-holes, ranging from All Bar One to ‘classic’ pubs such as the White Horse at Parson’s Green, where I drowned my sorrows in the Seventies. But along the way, M&B became an object of ardent financial desire, a status which radically altered its destiny. It fought off a bid from the Iranian-born tycoon Robert Tchenguiz, then got involved with him in a real-estate sale-and-leaseback that failed but left M&B with a £274 million loss on hedging contracts which turned into a one-way bet against falling interest rates; to complete this Noughties time-capsule of folly, the banks involved included RBS and Kaupthing of Iceland.
‘Troubled M&B’, as the press called it, was now well and truly in play, and Punch Taverns lined up next to bid. But as trading deteriorated in 2008, the deal collapsed. Then along came the so-called ‘Sandy Lane set’ from Barbados — billionaire trader Joe Lewis (evidently recovered from dropping a bundle on the collapse of Bear Stearns) plus Irish high-rollers John Magnier, J.P. McManus, Dermot Desmond and others. This gang was suspected by the M&B board of forming a ‘concert party’ to take control without launching a bid, to the detriment of other shareholders. The Takeover Panel found no evidence to that effect, but the row rumbles on ahead of M&B’s AGM on 28 January — at which Lewis’s company Piedmont, the biggest M&B shareholder, is seeking to restructure the board to its liking. Even Vince Cable has waded in on this one, and I don’t think I should advise you how to vote if you’re a shareholder from somewhere other than Barbados. All I can say is that it’s an awfully long way from Smethwick.
And what about the beer? It turns out that the M&B beer brand passed into the hands of a US group, Molson Coors, and that M&B Brew XI (slogan: ‘For the Men of the Midlands’) is still brewed under licence by Brains of Cardiff. To which one modern man of the Midlands comments on a beer blog: ‘Brewed? Extracted from a nearby horse, surely?’
Chocolate medal winner
It was good to hear Felicity Loudon, the interior decorator and granddaughter of Sir Egbert Cadbury, making a last stand on Tuesday’s Today programme against the capitulation of her forebears’ company to an increased offer from Kraft. When she first spoke up against ‘this American plastic-cheese maker’, everyone assumed she was scripted by Cadbury’s defence team. But Cadbury chairman Roger Carr told me that ‘she’s nothing to do with us, we don’t know anything about her’, and her intervention was all the more quixotic for the fact that the outcome of the battle was, in two senses, more or less inevitable. First, given that the strategy of Cadbury’s US-born chief executive Todd Stitzer has been all to do with buying and selling business units and squeezing costs, and nothing to do with sentiment, it was always likely the chocolate-maker would end up in a larger combine; in management terms, the only connection with the family-run Cadbury of old was the survival of its Bourneville factory, but even that now employs only a fraction of the worldwide Cadbury workforce. Second, in the absence of rival bidders, it was only a matter of time before Kraft upped its price to a level Cadbury’s institutional shareholders would be content to swallow.
Should we therefore dismiss Felicity Loudon as a fruit-and-nut-case? Certainly not. In today’s numbers-driven corporate world, it is good to be reminded (as I wrote in Falling Eagle, my book about Barclays) that ‘companies are not, and never have been, machines for making money… Whether they operate corner shops or giant factories, they are accumulations of human skill, hope and weakness, of individual and collective willpower, of accidents of history and advances of science. They have their own vocabulary, their own architecture, their own folklore.’ Felicity made that point eloquently, as I hope this column will continue to do. To adapt another memorable Cadbury slogan from an era now ended, she should award herself the CDM.
Back to the drawing board
So Sir Fred Goodwin, the former RBS chief executive, has a new job as adviser to RMJM, the Edinburgh architectural firm responsible (with Enric Miralles) for the notoriously unattractive and over-budget Scottish parliament building. I take a relatively sympathetic view of Sir Fred: he committed no crime; his RBS strategy and ABN Amro bid were backed by his board and major shareholders; he was much courted by ministers until they turned him into a national scapegoat; he gave back a chunk of the giant pension that the board awarded and ministers sanctioned. It would be grotesque to say he can never work again.
On the other hand, would you want Sir Fred to design your home extension? ‘You’re just not thinking big enough,’ I can hear those impatient Paisley tones. ‘How about an Olympic-sized swimming pool with an apartment block on top, funded by a sale-and-leaseback with a smart interest-rate hedge? In fact, speaking of hedges, how about a hostile bid for next door’s garden…’
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