Desmond fails to prevent Unidare's $60m acquisition

Financier Mr Dermot Desmond has failed in an unexpected bid to stop Unidare buying a US oil industry supplier for $60 million (€58.08 million). At yesterday's extraordinary general meeting to consider the purchase, representatives of his investment company, Beechworth International, strongly attacked Unidare management, saying the acquisition was "naive". They narrowly failed to stop the deal, however, garnering just over 48 per cent support from the shareholders who voted.

Beechworth, owned by Mr Desmond and Mr Pierce Casey, controls at least 27 per cent of Unidare. At the e.g.m., its representatives argued that Unidare's history had been one of ill-conceived strategies, poor acquisitions, consistently disappointing financial performance and significant erosion of shareholder value.

Mr Michael Walsh, on behalf of Beechworth, said there appeared to be a lack of control within the existing business, and said management had issued three profits warnings in 1996 and two more in the past four months.

The plan to buy Oklahoma Rig and Supply (ORS) was flawed, expensive, and high-risk, he argued, and "likely to result in further destruction of shareholder value".

While Mr Desmond remained silent, Mr Casey said profits at OHS had halved in five years: "The word on the street in Tulsa is that the vendor is a clever man who sold out at the top to a naive Irish company."

But Unidare's chairman, Mr Jack Hayes, insisted the ORS deal made sense for the company, and would "deliver substantial returns on the considerable investments we have made in the US", such as Nasco, its Minnesota-based wholesale welding equipment company.

"The proposal is the result of over two years of courtship, negotiation and extensive due diligence," he told the meeting. "The combination of ORS and Nasco provides a fine platform for further organic growth and acquisitive development."

He said Unidare's aim of late had been to divest low-growth businesses, and reinvest the proceeds in higher-growth companies: "This has been achieved effectively and necessarily has taken time."

"ORS is a very good deal for us. Apart from acquiring fine management, we are acquiring a growing, profitable company with good cash flow characteristics at a good price," he continued. "ORS's operating cash flow of $7 million, and growing, will contribute significantly to paydown of its related debt."

"Your board believes that ORS is a fine, unique opportunity that we should not slip. We fully recognise that in light of our recent poor results that this requires a leap of faith," he added. "But we are absolutely convinced that the acquisition of ORS would significantly improve the prospects of the group. We are backing the proposal with our own money, and strongly recommend that you do."

Mr Desmond, who would not make any comment, left the meeting before the vote was taken. It is understood he boarded a helicopter for Druid's Glen, where he played in a pro-am golf contest partnered with the favourite to win this week's Irish open, Scotsman Mr Colin Montgomery.

When the votes were counted, the proposal to buy ORS was passed by 51.7 per cent, with the remaining 48.3 per cent against.

"It was always going to be tight - they have 27 per cent plus," said Mr Hayes. "Dermot Desmond told me on Monday that he was against, and that he was soliciting `no' votes."

Mr John McGuckian, who sits on the Unidare board and now controls some 10 per cent of the company, said the purchase would prove a profitable one.

Neither men would speculate on Mr Desmond's intentions, and whether the attempt to block the sale was part of a bigger plan to wrest control of the company.