Business Opinion/John McManus: There is something of the man who doth protest too much about Sir Anthony O'Reilly's denial that he is trying to take Waterford Wedgwood private by the back door.
The bald fact is that he is putting a proposition to shareholders that could see his stake in the company rise from 25 per cent to 53 per cent and leave him poised to take out the remainder at an attractive price should the company's fortunes improve.
The proposed five for three rights issue at the company - which is being 70 per cent underwritten by Sir Anthony and his brother in law Mr Peter Goulandris - throws up enough permutations to fill a Karma Sutra for financial conspiracy theorists.
One of them is that by underwriting a rights issue that is doomed to failure Sir Anthony's camp's stake will be pushed over the 30 per cent level that triggers a full bid.
But it will happen at the cheaper post-rights price of six cent and not the current nine cent.
It is clear, however, that Sir Anthony does not want to take Waterford private at this juncture.
He has stated - as recently at last Thursday - that this is not his intention. In fact, he told shareholders at the company's annual general meeting it was ungrateful of them to suggest such a thing.
He has made it clear that to avoid the above scenario he will ask the Takeover Panel for an exemption from the obligation to make a bid if the rights issue fails and he is called on to fulfil his underwriting commitment.
In any case the rights issue is not likely to fail as it is pretty keenly priced.
But given the company's very serious problems - sales down 5 per cent in the first half - a number of shareholders will baulk at what is potentially throwing good money after bad.
It seems pretty certain then that Sir Anthony will come out of the rights issue with his grip on the company significantly strengthened. It is unlikely that he will end up with 53 per cent - as this would require a complete failure of the rights issue - but he should easily cross the important 30 per cent threshold, with a whitewash.
This in turn would leave him in a position to ultimately make a bid for the remainder of the company at something in the region of the rights issue price.
A poor showing by shareholders in the rights issues would also allow him evacuate the position adopted last week, on the basis that the existing shareholders are not supporting the company.
Fair enough. But why would he want to go to all this trouble?
Why not just bid for the company at its current price or even more cleverly allow the the rights issue to fail and them proceed to buy everybody out straightaway at the lower post rights price?
First point is that Waterford Wedgwood is not an attractive take private proposition at the moment.
The trading prospects are pretty bleak and the balance sheet would not facilitate any of the spectacular refinancing that are part and parcel of most take private transactions. Sir Anthony would also be taking on the companies €100 million pension deficit.
But that could change. The company has been restructured - at a cost of €200 million - over the last two years. The benefits have yet to really feed through, but perhaps in time they will. Royal Doulton - the takeover of which will be funded by the rights issue - has also been extensively and expensively restructured and its production will be transferred to Wedgwood's plant at Barlaston.
This, according to Sir Anthony, would substantially increase top-line sales without greatly increasing costs.
No mention of profits there, but with a fair wind and a stronger dollar, things could turn quite quickly for Waterford Wedgwood.
Against that, there are many risks. The Royal Doulton acquisition may provide a temporary fillip to the top line, but the outlook for the tableware market is pretty gloomy.
Trying to compete in this market with a British cost base is an extremely daunting challenge.
No matter what the company does, it will not match the costs of production in China.
In fact it would be far more sensible for Waterford to cease production in the UK - and Ireland for that matter - in favour of outsourcing from the Far East.
But doing so would almost certainly lead to demands from the workers that are losing their jobs that the €100 million deficit in the company pensions schemes be closed out.
As a result the company must add an out of line cost base to its list of problems which include weak demand and adverse currencies.
As a consequence few analyst are anything but lukewarm at best about the company.
It is not at all surprising then that Sir Anthony doesn't want to buy Waterford Wedgwood at the moment, but he would appear to be positioning himself - at modest cost - to capitalise handsomely should things start to turn in the company's favour.
Its a brilliant if somewhat Byzantine plan, and one worthy of the great master. But perhaps the explanation is a bit more mundane.
Maybe he is just stepping in to underwrite a badly needed rights issue that few others want to touch because he believes in the company "and its world-class portfolio of products".
It is axiomatic that the simplest explanation is more often the correct one, but I know which I prefer.
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