AS he delivered the opening address to shareholders at Mitchells & Butlers’ annual meeting in Westminster last Thursday morning, the pub firm’s chairman invoked the words of Charles Dickens.

Describing the mess the Harvester and All Bar One owner finds itself in after the £274m unravelling of a financing deal, a grim-faced Roger Carr told a packed Queen Elizabeth II conference hall: “It is the best of times, it is the worst of times.”

Perhaps another Dickens quote, from Barnaby Rudge, might have been more appropriate. “Something will come of this. I hope it mayn’t be human gore.”

A number of investors at the meeting scented blood and were calling for more M&B boardroom heads to roll, to join that of Karim Naffah, the finance director who resigned on Tuesday. He stepped down the morning the full extent of the fallout from the deal was revealed. However, one leading shareholder said: “His departure does not reset the dial.”

Although Carr received warm applause after delivering his mea culpa, it did not stop plenty of private shareholders from making sure the board knew exactly what they felt about the situation. “Your words butter no parsnips,” one deeply unimpressed investor told Carr. “You’ve made a right mess of this company.”

The financing deal that provoked all this anger dates back to last summer, when the company was pursuing a joint-venture with R20, an investment vehicle of property tycoon Robert Tchenguiz, himself a 23% shareholder in M&B. The deal, which would have injected around two-thirds of its 2,000 pubs into a property joint venture, was designed to return about £1 billion to M&B’s shareholders.

The group took out a hedge as part of a requirement from the banks underwriting the debt for the venture. But the market moved against the company — with disastrous consequences. When the credit crunch hit, the banks withdrew the funding, but M&B had already put the hedge in place, leaving it exposed. Carr said that the company did not move to close the position, believing the markets would correct themselves and that the downturn in the second half of last year was a hiccup. Finally, in January, the group took the decision to close out the hedge, leaving the losses to become actual rather than the theoretical paper deficit they had been.

The mixed atmosphere at the annual meeting reflects the fact that many investors were unsure who to blame for the debacle. The simplistic view would be to blame Tchenguiz but Tim Clarke, chief executive, refused to lay the board’s difficulties at the door of the entrepreneur.

Tchenguiz had been lobbying fellow investors to get the board to examine plans for a real-estate investment trust, or Reit, a separately quoted structure that would own the company’s property assets in a more tax-efficient way.

The board was reluctant to pursue this, and it was the company and its advisers that proposed the joint venture as a compromise solution.

The big problem was not the structure of the deal, but the failure to close out the hedge once it became apparent the market was moving against it. “They’re in the pub business, not the betting business,” noted one analyst.

At the annual meeting, shareholders expressed as much disdain for M&B’s advisers and bankers as for the board. But, as Carr said, to criticise them now was looking at things “in the rear-view mirror”.

The question is where the company goes from here. On Tuesday, M&B also announced that it would launch a strategic review, and followed this up a day later by revealing that it had received preliminary approaches from potentially interested buyers, without disclosing the identities of the would-be bidders. On Wednesday, the shares jumped 18% on the news.

The excitement was short-lived.

On Thursday, the shares fell sharply, closing down almost 6%, as analysts reacted with some cynicism to the news of a possible takeover. “This company has had so many reviews in the last few years; why does it need another one?” queried one leisure analyst.

Another, Jamie Rollo of Morgan Stanley, wrote in a note to clients: “It is not clear whether these approaches are genuine hard interest from buyers that have been waiting in the wings, or whether they are from potential buyers simply contacting M&B’s adviser to see whether there is a formal process.”

Nigel Parson, leisure analyst at Evolution Securities, said: “The company is clearly not in receipt of an offer, it’s not even in receipt of a phone call. So why announce?”

The surprise at the announcement has not stopped speculation as to who might try to buy M&B. Inevitably, Tchenguiz has featured, although this seems unlikely, say analysts. He tried to acquire the company two years ago, but his 575p-per-share offer was rejected by the board. The shares closed on Friday at 450Äp, giving it a market value of £1.8 billion. But he will have a key role should any other bidder emerge.

More likely trade bidders could be Punch Taverns or Whitbread. The former played down its interest, although it has said it is “monitoring events”.

The latter might see potential in putting its Premier Inn budget hotels next to many of M&B’s pubs, but a deal might not appeal to its investors who have come to appreciate its ever-increasing focus on hotels and coffee shops, sectors that are displaying growth rather than the torrid time the pub industry is enduring.

In the current climate, it is also hard to envisage a full cash bid from a privateequity player, but there may be room for a more creative deal structure.

A number of firms are in the frame, including Cinven, CVC and Texas Pacific Group, all of which have invested previously in the pub industry.

One thing seems likely. If the M&B board fails to find a buyer, more heads could roll.

One leading shareholder said: “Our continued support is only to the extent that things are being moved on extremely proactively”.

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