Crean seeks to secure all of Inishtech

INDUSTRIAL holding group James Crean will today make a 550p per share offer for the 28.8 per cent of Inishtech it does not already own and plans to subsequently sell on all of Inishtech.

The 550p per share will value Inishtech at £90 million and will involve Crean paying £26 million for the minority shareholdings if it is successful. Market sources suggested, however, that this surprise move by Crean may be a deliberate tactic to flush out a counter bidder, probably Clondalkin, which is understood to have indicated its interest in acquiring Inishtech.

It is understood that Crean has decided to offer to buy out the minority shares, having failed to agree a price for sale of its own 71.2 per cent stake to Clondalkin. Earlier yesterday, Inishtech announced that it had received approaches "which may or may not lead to an offer for the company at a significant premium to the share price."

Inishtech also said that three senior Crean executives, Mr Brian Molloy Mr Peter Wynne and Mr Philip Soden were leaving Crean to join Inishtech as part of a "support services team". This led to suggestions that a management buyout might be in prospect, but this was later denied by sources close to Inishtech.

Inishtech last traded at 408p and the early announcement had the effect of pushing the bid price for the shares up to 450p. Given that Crean is now willing to pay a 35 per cent premium for Inishtech over the last traded price of 408p it seems likely that the minority shareholders will accept the offer - bar a counter bid.

This move by Crean follows a failed effort in late 1994 to buy out the minority shares when Crean said that it would offer its own shares in payment to Inishtech shareholders. The Inishtech independent directors said at the time that they would like to a cash alternative to any paper offer, but Crean subsequently withdrew when no agreement on a cash alternative could be reached.

By making an all cash bid at this stage, Crean is taking a major gamble on its ability to sell on Inishtech to a third party. Either that or Crean is hoping to flush out a counter bidder who would agree to Crean's 550p per share offer - a move that would be welcome to Crean chief executive Mr Ray McLoughlin.

The market will undoubtedly give its reaction to the Crean tactic today. Yesterday, the Crean shares were bid upwards to 225p - probably in anticipation of a cash windfall for Crean. Today's activity in the share will indicate the market's belief in Crean's ability to carry out its revised strategy.

No spokesman for Crean was available for comment last night, but it is. understood that the acquisitive Clondalkin print and packaging group had indicated its wish to bid for Inishtech, but was not willing to meek the sort of price demanded by Crean. Clondalkin has similar print and packaging interests as Inishtech, and the two companies would be a handy fit. The question is how high Clondalkin chief. executive Mr Henry Lund may be willing to go with its plans to substantially increase the size of his company.

At 550p per share, Crean is offering to buy out the minorities on a multiple of over 11.5 times its forecast 1995 earnings per share. Clondalkin itself is trading on a multiple of 11.9 times its forecast 1995 earnings per share. On this basis, topping Crean's 550p per share offer might not seem to be over the top.

Given Crean's own balance sheet estimated end 1995 debt of over £22 million as well as £35 million in convertible shares - a bid for the outstanding shares in Inishtech without the certainty of selling on the wholly owned company is a major gamble.

If Clondalkin, or any other party, declines to top Crean's 550p per share then Crean could be left with a wholly owned Inishtech on its hands as well an even more stretched balance sheet. If a counter bid does emerge, then Crean itself would be the main beneficiary.

Clondalkin itself has the resources to pay a high price for Inishtech - the question is whether Clondalkin believes paying over 550p per share is justified.

Both Clondalkin and Inishtech - are similar businesses, with print and packaging interests in Ireland, Britain and the US. In 1994, Inishtech reported pretax profits of £7.4 million on sales of £68.2 million - the company's broker Davy is expecting pre tax profits of £9.3 million for 1995 and £10.8 million the following year. Clondalkin had profits of £15 million 1994 and is expected to boost these profits to £18.5 million in the current year.