The two families who own department store group Arnotts are heading for a buyout battle after one of them revealed that it is planning to make an offer valuing the business at €500 million, writes Barry O'Halloran.
The O'Connor family, which owns 24.7 per cent of Arnotts, told executive chairman Richard Nesbitt last night that it intends offering €200 million cash for the entire share capital of the group, pending the outcome of due diligence.
The O'Connor family is assuming that Arnotts' debts come to €310 million, meaning that its offer values the business at a total of €510 million.
The cash bid values Arnotts' shares at €50.57 each, more than 3½ times the €14.26 paid by a group led by Mr Nesbitt which bought out Arnotts plc in 2003 and delisted it from the Dublin Stock Exchange.
However, Mr Nesbitt, who controls 51 per cent of the group, said last night that he would not be selling.
He dismissed the offer as "flawed" and said he was personally prepared to offer the O'Connors €25 million for their stake in the business. He maintained that the real value of the business was somewhere between €100 million and €130 million.
Mr Nesbitt said that the indicative offer from the O'Connors under-estimated the group's debts by between €80 million and €90 million.
"If you take that into account, you will see that the real valuation of the business is closer to €100 million," he said.
He added that it was "startling that the offer over-estimates the value to that degree".
On that basis, Mr Nesbitt argued that once the O'Connors and their advisers had seen the books and completed due diligence, their offer would be closer to his estimate of the business.
Tensions over the direction the group is taking have been growing between Mr Nesbitt and the O'Connors, led by director Conor O'Connor, for some time.
They have the option of serving notice that they want to exit and of nominating a price, which can be independently reviewed, if necessary.
Mr Nesbitt has invited them to do this several times, but they have not done so.
The differences are understood to centre on the group's property business.
The O'Connors intend making the offer through their vehicle, Malpas Ltd. They have the backing of Bank of Scotland Ireland as lenders and are being advised by Key Capital.
It is understood that the family has been considering going down this route for some time and that it is fully funded.
Along with the O'Connors and Mr Nesbitt, the other shareholders include various members of the Nesbitt family, spread around this country and Britain.
Its board includes a number of high-profile figures from Irish business, including accountant Hugh Cooney, financier Niall McFadden, Trevor Bowen, who works with the rock band U2, and businesswoman Carol Moffet.
Last year Arnotts Holdings Ltd had a turnover of €144 million and posted a pre-tax loss of €1.7 million.
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