Ewart board split over Dunloe offer

A boardroom row has erupted at Belfast property company, Ewart, following the shock announcement that its chairman, Mr Brian O'Connor, has agreed to accept the Dunloe House revised offer in respect of his own 16 per cent stake.

Ewart is understood to be considering what legal action it can taken the chairman, as it already had an offer of 79p per share, or 4p above what Mr O'Connor agreed to accept from Dunloe. The offer, known to Mr O'Connor, was from a private Northern Ireland company and was conditional on support from the Ewart board.

The turn-about occurred just 24 hours after Mr O'Connor took part in a Ewart board meeting, which unanimously rejected a revised Dunloe offer of £24.4 million sterling (£29 million).

Following new of Mr O'Connor's change of heart, Ewart yesterday complained to the Takeover Panel in London, which is investigating the complaint. The Belfast company said it was dismayed by what it views as "precipitous action" which it believes "could be extremely damaging to all Ewart shareholders".

Mr O'Connor, in a clarifying statement late yesterday, explained he believed that the uncertainty created by the bid situation over the past month should be brought to an end. "My action is designed to achieve this and create certainty for all shareholders." He has now said he will resign as chairman if the Dunloe bid becomes unconditional.

Mr O'Connor's decision to accept the offer brings Dunloe closer to success, provided the Takeover Panel agrees, with acceptances from shareholdings owing more than 42 per cent of Ewart.

The first the Ewart board knew about Mr O'Connor's press statement of acceptance of the Dunloe offer (the board had been informed about the decision to sell his shares) was when this newspaper contacted the managing director, Mr Barry Gilligan, for comment. It appears that Ewart had held a board meeting with the participation of Mr O'Connor, unaware of his intention to resign. The move by Mr O'Connor has created a deep rift among the Ewart board members. Lining up on one side are the executive directors - Mr Gilligan, Mr Dominic Deeny, Mr David Robinson and non-executive director, Mr Harold Ennis, who are opposed to a get-together with Dunloe. On the other side is Mr O'Connor, who has changed his mind and is now firmly in favour.

The two other Ewart board members, Dublin solicitor, Mr Noel Smyth, who controls Dunloe, and his associate and fellow director, Mr Stewart Harrington, have not taken part in the proceedings. Mr O'Connor's acceptance will remain intact unless a counter bidder gains control of Ewart. In that scenario, he could accept the higher offer. Mr Smyth, who owns 26 per cent of Ewart, now has acceptances (provided there is not a higher offer) of more than 42 per cent, bringing him close to the 51 per cent control level. The first offer valuing Ewart at £21.1 million sterling was accepted by shareholders representing a mere 0.56 per cent.

A brief statement from Mr O'Connor said he had "decided to accept the increased bid by Dunloe House plc for the shares registered in the name of my company, Fortress Hill Limited. Accordingly, subject to the Dunloe bid being, or becoming unconditional, as to acceptances, it is my intention to stand down as chairman of Ewart and to concentrate instead on my business interests in the Far East".

Mr O'Connor purchased his shareholding of 4.96 million shares three years ago at prices between 64.5p sterling and 70p per share and will barely break-even by accepting 75p sterling. The other alternative offers are loan stock of 78p and/or 18 new Dunloe shares for every 5 Ewart shares, valuing each Ewart share at 75p sterling. Mr O'Connor is likely to go for the cash alternative.

Mr O'Connor owns 30 per cent of Quality Healthcare Asia, a publicly quoted Hong Kong company, with a market capitalisation of some £25 million. Mr Barry Gilligan, Ewart's managing director, had indicated that the revised offer was not acceptable, as it was well below the net asset value per share of 81p sterling.