Allied Domecq cancels C&C preliminary results

Allied Domecq's decision at the last minute to cancel the publication of Cantrell & Cochrane's financial results for the year to the end of last August is now seen as a clear indication that a flotation of the Irish drinks group in the new year is likely if stock markets remain firm.

C&C was due to release its results today but it is understood that Allied decided to cancel the release of the figures at the prompting of the investment bankers advising on the future of C&C - IBI Corporate Finance, Goldman Sachs and SBC Warburg. C&C chief executive Mr Tony O'Brien declined to comment on the cancellation of the results announcement or on the results.

It is understood, however, that following the slump in stock markets in September and early October, a sale of C&C to a consortium of venture capital companies became the preferred option for Allied.

It is understood that five venture capital groups - none of them Irish - carried out due diligence on C&C and that three of these venture capital groups had been short-listed as possible buyers. No trade buyer emerged as a bidder for C&C, and it is understood that Allied also decided against breaking up C&C. The strong recovery in the Dublin and London stock markets has now put the flotation option very firmly back in the frame with a possible flotation of C&C in the new year.

NCB Stockbrokers forecast yesterday that the ISEQ Index in Dublin will end the year at 4700, only 700 points below its high for the year. Analysts in London have suggested that the FTSE could be over 5700 by year-end. If these forecasts prove true, then analysts believe that C&C could be valued at close on £600 million in a flotation.

It is understood that this flotation could be completed within six weeks of a decision to go ahead. Allied bought out Diageo's 49.6 per cent shareholding in C&C for an estimated £270 million this year.

Even with a price tag in the order of £600 million, market sources believe that there would be strong institutional demand in both Dublin and overseas, given the group's financial performance, the strength of its balance sheet and its position then as Ireland's only publicly-quoted drinks group. "It looks like Allied want to hold the good news for a more appropriate time," said one source in a comment on the decision to cancel publication of the C&C results.

He added: "Allied's strategy is to be focused on major brands and C&C doesn't fit into that strategy so an exit was sensible. Both sale processes, a float and a sale to financial buyers, are ongoing and Allied is determined to get fair value. The price is the key issue."

Analysts believe that, given the strength of the domestic economy, C&C is likely to have generated profits growth of 10 to 15 per last year. This would suggest profits for the year to the end of August are around £60 million with sales likely to be in the order of £400 million.

C&C had net cash of £65 million in August 1997, and given the strength of its cash-flow, it is likely that this cash hoard is in excess of £75 million, bar the payment of a substantially larger dividend to its parent company.