Clondalkin shares soar on buyout

Clondalkin Group shares soared yesterday, rising from €6.80 to €8.25, following the announcement that the management team may make a bid of around €9 per share for the company.

Adare Printing shares rose by 7 per cent to €6.70 as investors looked for similar management buy-outs (MBOs). However, Adare whose equity market capitalisation rose by €6.3 million (£5 million) said it had no MBO plans. The value of Clondalkin increased by €61 million (£48 million) and the proposed bid values Clondalkin at €381 million (£300 million).

Analysts said the MBO will focus attention on other small companies which have been accorded a low market rating. It shows a "number of well run companies with good track records which look cheap" on the basis of a similar MBO, said Mr John Mattimoe, an analyst with NCB Stockbrokers. Analysts were pointing to Kingspan, Adare, Greencore, Irish Continental, McInerney and Barlo, which could have similar reasons to go private as Clondalkin.

Mr Peter Lynch, finance director of Adare, said his group had no plans to go private and if it had, it would not have made its last acquisition - Kall Kwik Printing in Britain - which increased its gearing. The suggested bid price "looks like a good price for Clondalkin shareholders", he said. Institutional shareholders, in general, view the suggested offer as reasonable, particularly when judged against the recent share price. However, some wonder if it adequately reflects Clondalkin's future earnings stream. Mr John Lawrie, chairman of Aberdeen Asset Management Ireland, the investment manager for Scottish Provident, which has a 5 per cent stake, said the proposed bid does show there is value in second-liners and he was pleased that the "management was prepared to put their money where their mouth was".

However, he said he didn't "warm" to parting with his shares. "I need to be persuaded that the price is a fair one." Also, he said the independent directors should "look at all the possible means of realising shareholder value".