Shareholders say Clondalkin buyout is not a `done deal'

Some smaller institutional shareholders who are dissatisfied with the terms of the €385 million (£303 million) Clondalkin management buyout have warned that the outcome of the buyout is not a "done deal" and that the Candover management group may struggle to get the 80 per cent acceptances that will allow it to compulsorily buy any outstanding shares.

Aberdeen Asset Managers investment manager Mr John Lawrie, who manages Scottish Provident's 5 per cent stake in Clondalkin, said that he had declined to give any irrevocable acceptance to the management offer and that other fund managers had also refused to give such acceptances.

It is understood that the 37 per cent acceptances that the management group has tied up include the three biggest shareholders, Bank of Ireland Asset Management, AIB Investment Managers, Ulster Bank Investment Managers and two smaller institutional shareholders, Eagle Star and ESB Fund Managers.

Mr Lawrie said that he understood the management group's frustration with the way the market has treated Clondalkin's shares, given the company's consistent record of earnings growth. But he described the €9.10 (£7.17) a share offer price as "remarkably cheap" at around 12 times historic earnings.

Mr Lawrie accepted that Clondalkin - like many other second-line stocks - had suffered as fund managers shifted their attention towards larger European stocks. "But it still doesn't make sense to sell a company at 12 times earnings to buy a European company at twice that rating," he stated. "I need to be persuaded it's a reasonable price and at the moment it's not Aberdeen's intention to accept for Scottish Provident's 5 per cent." Mr Lawrie has previously rejected a number of buyouts that he believed were too cheap, notably DCC's bid a few years ago for Printech.

Mr Lawrie's views were shared by Norwich Union investment manager Mr Martin Nolan - Norwich has just under 2 per cent of Clondalkin. "I remain to be convinced it represents full value. I believe that the company has a bright future that is not reflected in the price, so why should we sell if there's value there," he said.

Friends First fund manager Mr Pramti Ghose said: "It's hardly a racy price and I would prefer it to be higher but it looks like it'll go through. I would be a reluctant accepter of the offer."

Market sources believe that although the arrival of a higher offer would release those who have accepted the management offer from their irrevocable acceptances, a counter-bid is unlikely. "The management's plans were leaked a month ago and since then nobody else has made a move on Clondalkin. It's unlikely that we will see a counter-bid," said another fund manager.

Another Clondalkin shareholder was not so convinced and said that potential counter-bidders may have been biding their time to see the exact terms of the management offer before deciding if they will make a move. He added, however, any potential counter-bidder may be put off by the fact that the MBO group is so large, with 44 of Clondalkin's senior management team all involved.