Nesbitt buyout fuelled by row over strategy

Arnotts chairman Richard Nesbitt's decision to buy the shares of the O'Connor family marks the second time in five years that he has seen off efforts by others to wrest control of Dublin's oldest department store.

Back in 2002, the then non-executive director marshalled the Nesbitt and O'Connor families in a €257 million deal that saw off a hostile takeover attempt from Peter O'Grady Walshe.

That move saw the publicly-listed company taken private in 2003 with barrister Nesbitt as chairman.

Nesbitt is the fourth generation of his family to be involved with Arnotts - a line that stretches back to 1867, just over 20 years after it was founded.

The O'Connor family, which until yesterday, held 24.57 per cent of the group, first became involved in the store in the 1940s.

Tensions between the two families has been growing for some time and erupted in June after the O'Connor family launched a €200 million bid for the group at the end of May.

The main source of the tension is what Nesbitt calls Arnotts' "property aspirations". That is the €750 million 'Northern Quarter' plan to revitalise a large chunk of Dublin's city centre between Henry Street, the main shopping area on the city's northside, and Parnell Street.

The O'Connors believed that Arnotts should stick to what it does best, running department stores, and not put so much energy into property development, which is another business entirely.

But Nesbitt pushed the idea, and had the backing of board member Niall McFadden, the property developer and financier.

McFadden helped to structure the deal that allowed the two families to buy out Arnotts. He wields a fair bit of influence as one of Nesbitt's main supporters on the board.

Arnotts secured planning permission for the €750 million 'Northern Quarter' redevelopment of its extensive landholding between Henry Street and Middle Abbey Street in Dublin in July. The company spent an estimated €100 million buying many of the buildings between Henry Street, the GPO arcade, Middle Abbey Street and Liffey Street over the past 18 months.

Nesbitt said the project would "write the next chapter in the evolving history of Dublin city".

The new quarter will include 47 shops, 14 cafes, restaurants and bars. Some 175 apartments and a 149-bedroom four-star hotel behind the former Independent Newspapers building on Middle Abbey Street will also be provided.

Nesbitt rubbished the €50.57 per share bid from the O'Connor's in May as a "stunt" and subsequently offered to buy the O'Connor's out of the group for €25 million. At the time, he accused the O'Connors of having "total disregard" for the interests of the business by involving the media in its bid, which puts an enterprise value of €510 million when debts are included.

Nesbitt himself said at the time of the O'Connor approach that he had "invited" them to use the exit mechanism provided by the company several times over the last four years "but they declined to do so," he said.

This exit mechanism allows the O'Connors to notify the other stakeholders that they want to sell their shares, and name their sum. In the end, Nesbitt took the initiative himself.