Clerys board rejects management buy-out

The general manager of Clerys, Mr Tom Rea, is now on leave-of-absence, after his management-buyout (MBO) offer was rejected by the board. Clerys, whose flagship 120,000 sq ft store on Dublin's O'Connell Street has been the mainstay of the department store's shopping, is not seeking offers for its purchase and is not currently discussing any offers, its chief executive, Mr Denis Ryan, said yesterday, after confirming that the MBO led by Mr Rea had been rejected by the seven-member board.

All of the board, with the exception of Mr Ryan, are related to the Guiney family. He said there was surprise at the way the offer had been made. Mr Rea is one of four managers who report to Mr Ryan.

Mr Ryan said Mr Rea's proposal had not been supported by any board members. "The board decided not to recommend it to shareholders."

He would not confirm that the MBO offer was for £19 million as was suggested in the Sunday In- dependent, but said the offer had been considered "fully" and rejected for a number of reasons. The price "would only be one of a number of factors" in rejecting the offer.

"We are not seeking any offers and we are not discussing any offers," he said.

He added that the management and staff had been told this morning that it was business as usual. Mr Rea's offer was made in early December and was rejected at the end of January. "It was not what I would deem to be a management buy-out. He (Mr Rea) was on his own," he said.

Clerys has 80 shareholders, made up mostly of the family of Mr Denis Guiney. The trust established by his widow, Mrs Mary Guiney (98), controls 52 per cent of the 100,000 preference shares. AIB Capital Markets is the single largest shareholder in the group, holding a 17 per cent stake of the 400,000 ordinary shares. It has operated an internal market in the company's shares and was not involved in Mr Rea's move. The trust controls just over 5 per cent of the ordinary shares.

Clerys, which has been under the present ownership for 59 years, made its first move outside of Dublin's city centre in 1992 when it established a fashion 13,000 sq ft store at the Square, Tallaght.

Since then it has opened a 10,000 sq ft home furnishings and furniture store, "At Home with Clerys", in Leopardstown, and is due to open a second one, on a 15,000 sq ft space, in Blanchardstown next month. It also owns Guiney & Co, at 79 Talbot Street, the original business begun by Mr Denis Guiney.

Mr Ryan added that the turnover for 1998 was expected to be "approaching £40 million", taking the Leopardstown and its 35 concession outlets into account. This compares with a £20 million turnover in its core activities in 1997. One industry source said that, comparing the group to its nearest competitor, Arnotts, the suggested £19 million bid is almost half the group's real value, considering the investment potential of its properties.

Arnotts has price/sales ratio of about 0.9, based on its market capitalisation of €120 million (£95 million) and a projected €131 million (£103 million) turnover in 1998. Its results are due out today.

With its latest Blanchardstown addition and the completion of its £10 million refurbishment programme, Clerys is on course to surpass the £40 million turnover market this year. "We have not really got the benefit of the revamp. We do not expect that to come through until another two months when the second phase of refurbishment will be complete," Mr Ryan said.