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UPDATE 1-UK "pasty tax" victor quits Greggs for Brakes
December 10, 2012 / 9:41 AM / 5 years ago

UPDATE 1-UK "pasty tax" victor quits Greggs for Brakes

* Greggs CEO Ken McMeikan to leave when successor appointed

* Greggs says no change to trading since Oct update

* Greggs shares fall up to 4 percent

By James Davey

LONDON, Dec 10 (Reuters) - Ken McMeikan, the chief executive of British baker Greggs who led a campaign that defeated the government over a proposed “pasty tax”, has quit the company to take the top job at a private equity-backed catering firm.

Shares in Newcastle, northern England, based-Greggs, Britain’s largest seller of food on the go, fell up to 4 percent on Monday after it said McMeikan, CEO since 2008, would become CEO of Brakes Group once his successor had been appointed.

Brakes, owned by U.S. private equity firm Bain Capital, is a supplier to the foodservice industry in the UK, Ireland, France and Sweden. It employs 10,000 and has a turnover of over 2.6 billion pounds ($4.2 billion), dwarfing the 701 million pounds Greggs had in 2011.

Brakes has a five-year plan involving a 250 million pounds multi-year investment program.

McMeikan, a former Tesco and J Sainsbury executive and Royal Navy veteran of the 1982 Falklands War, was the architect of Greggs’ strategy to move from a group of semi-autonomous regional businesses to a national chain and diversify into wholesaling, new format stores and cafes, offering the firm important new income in the downturn.

But his finest hour came in May when he forced Britain’s finance minister, George Osborne, into an embarrassing U-turn over his plan to impose a 20 percent VAT sales tax on fresh-baked savouries, such as sausage rolls, Cornish pasties and steak bakes, that are sold warm - the so-called “pasty tax”.

“Greggs is at a difficult point in its evolution at the moment, with pressure on trading and decisions to be made on how best to allocate capital (store refits or roll-out). The timing of this departure is therefore unhelpful,” said Espirito Santo Investment Bank analyst Sanjay Vidyarthi.

Analysts said McMeikan’s salary at Brakes would easily surpass the 664,035 pounds of salary, benefits and bonus he made at Greggs in 2011.

“There are lots of pluses in the move, although it is hard to avoid the lingering feeling that he might have held out for one of the top jobs in the sector, with a few vacancies likely to be coming up next year,” said independent retail analyst Nick Bubb.

Greggs said there had been no significant change to trading since its Oct. 11 update, when it reported underlying sales down 2.6 percent in the 14 weeks to Oct. 6.

“With a tough Christmas comparative, we think Greggs will have its work cut out to meet market expectations,” said Espirito’s Vidyarthi. He forecasts a pretax profit of 51.5 million pounds for 2012 versus a current market consensus of 52.5 million pounds.

Shares in Greggs were down 12.3 pence at 474.4 pence by 0912 GMT, valuing the business at 477 million pounds.

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