Boardroom blitz at M&B sees off Laffin
If former Mitchells & Butlers (M&B) chairman Simon Laffin needed a drink after being thrown off the company's board last week, it's a fair bet he stayed away from All Bar One, O'Neill's or any of its other 2,000 outlets.
The row between Laffin and the firm's major shareholders - billionaire Joe Lewis and racing magnates JP McManus and John Magnier - had been rumbling on for months and turned increasingly bitter.
It broke into the open at the end of last year when M&B sacked four non-executives, two of them representatives of Lewis's investment vehicle Piedmont, and reported Piedmont to the Takeover Panel for allegedly attempting to act in concert with other shareholders to seize control of the company.
The appeal did M&B's board no good, because the Takeover Panel concluded that there was insufficient evidence to support the claims. And at an annual shareholder's meeting in Birmingham last Friday, Laffin was voted out of his post, along with his predecessor Drummond Hall and fellow non-executive Tony Bates.
Two-thirds of the votes cast went against Laffin, the majority of which were held by Piedmont (which has a 22.8% stake), and Elpida, the investment vehicle of McManus and Magnier (17.6%).
In the run-up to the meeting, as well as in its aftermath, there was a press feeding frenzy, as the boardroom drama was characterised as a "bar-room brawl". But what happens to the company once the broken glass is swept off the floor and the blood wiped from the walls?
John Lovering, the outgoing chairman of Debenhams, has been installed as the new chairman, while former Hamley's boss Simon Burke, Fitness First founder Michael Balfour, and former Scottish and Newcastle executive Jeremy Blood were all appointed as board directors after being proposed by Piedmont.
Chief executive Adam Fowle appeared to have survived unscathed, as did finance director Jeremy Townsend.
Lovering has already proposed a "thorough review" of the business over the next 60 days, concentrating on brand, overheads and expenditure, the results of which analysts expect to see by the time the company issues a trading update in March, at the end of its first-half period.
However few believe that Lewis's victory in the boardroom battle means that he will call the shots through his representatives on the board.
Nigel Parson, analyst at Evolution Securities, said: "The principle of one shareholder dominating the board is of concern. But I think you would struggle to call the new directors appointed puppets. They have very good CVs in their own right."
Meanwhile, Mark Brumby, an analyst with Astaire Securities, added: "The company is continuing a review but it wants to put the past behind it. The fact that we have not had any resignations at board level is good. There has been no scorched earth retreat or anything like that, which is something to be grateful for."
And as another analyst pointed out, with Fowle still in charge as chief executive, it is unlikely that the company will deviate from its plan, already revealed in a presentation earlier this month, to expand six of its brands - Vintage Inns, Harvester, Toby Carvery, Sizzling Pub Company, Premium Country Dining and Crown Carveries - by 50-100%. The six brands currently account for around 900 of the 1,970 outlets in M&B's estate.
"I have heard that Piedmont were happy when Adam Fowle was appointed and they therefore think that he deserves a chance," the analyst added.
That does beg the question why Lewis and others pushed for such extensive change to the board in the first place - change that the M&B board reputedly spent £2m attempting to resist - given that the strategy set out before the annual meeting looks likely to endure.
But, as one observer put it: "In a messy divorce, if you ask whose fault it was, you are never going to get the truth. You are just going to get a lot of accusations and entrenched positions. And once both sides had dug their heels in it was quite likely to end the way it did."
Another added: "I think the mud-slinging has probably damaged M&B and Piedmont. That damage has probably reduced the pool of potential investors in the shorter term, pending the re-establishment of trust."
By Neil Gerrard
