Crean takeover of Inishtech nears as stake jumps to 93%


INDUSTRIAL holding group James Crean has taken a giant leap towards a full takeover of Inishtech, increasing its stake in the company from 71.1 per cent to 93 per cent. A statement confirming the purchases is expected this morning.

Davy stockbrokers went into the market yesterday morning on behalf of Crean, bidding 550p per share - the price at which Crean five weeks ago signalled its intention to bid for the minority shares in Inishtech. Davy bought 3.64 million Inishtech shares in three separate deals.

The decision by Crean to go into the market for Inishtech follows a long wrangle with the Inishtech board over the conditions attached to Crean's proposed offer. This wrangle has meant that Crean's intended 550p a share offer has failed to get the Inishtech's board's recommendation, although the board emphasised that the cash element of the offer was not an issue.

It is understood that Crean advised the Inishtech board of its plans to buy shares directly in the market, and Inishtech did not object. Informed sources believe that Crean became impatient with the process and decided to present the Inishtech board with a situation where it simply could not withhold a recommendation for its offer.

With 93 per cent of the shares under its belt, Crean believes the Inishtech board now has little option but to give the proposed offer its support.

The main difficulty between the Crean and Inishtech boards is understood to have been the role of Inishtech management, particularly the role of the three Crean executives - Mr Brian Molloy, Mr Peter Wynne and Mr Philip Soden - who left Crean to set up a "support services team" at Inishtech.

Crean has said publicly that, if its proposed bid for Inishtech is successful, then it would hope to sell on the company at an early date. The continued presence of key Inishtech management would undoubtedly be crucial for any potential buyer and Crean is understood to be keen to maintain the new management structure at Inishtech while it tries to find a buyer.

Clondalkin and the British group, Wace, are still seen as the most likely bidders if Crean moves to sell Inishtech after buying out the minorities.

None of the three Inishtech (and former Crean) executives have spoken publicly since Crean announced its proposed bid, but informed sources have described relations between the three and their former employer as "strained" and unlikely to have been improved by Crean's market raid yesterday.

But there is concern among some of Crean's institutional shareholders at the strategy being adopted by the Crean management, particularly the strategy of buying out Inishtech without any guarantee of being able to sell on the company at an acceptable price. Yesterday's market raid cost Crean over £19 million. A full buyout of the minorities would cost a total of £26 million.

"Inishtech will have to be sold post haste if Crean gains full control," said one institutional shareholder, who admitted, however, that Crean will not be in a powerful position to make a quick sale.

Although Inishtech is resident in Gibraltar, it is registered in Ireland and the normal provisions of the Takeover Code and the Companies Act apply in this current situation.

Crean has already made its proposed offer conditional on obtaining acceptances from 80 per cent of Inishtech shareholders by value and 75 per cent by number the requirements under Section 204 of the Companies Act to compulsorily acquire any outstanding shares.

In effect, Crean will have to get 80 per cent acceptances in respect of the 6.1 per cent of Inishtech shares not snapped up in yesterday's buying.