Jurys Doyle soap opera nears resolution

 

Business Opinion: The soap opera that is Precinct's pursuit of Jurys Doyle appears to be coming to some sort of a resolution. As of last Friday the two sides have committed to try and agree a deal of €17.50 a share, valuing the group at €1.1 billion.

Two big issues still remain to be resolved. The first is the decision of the group to sell a 4.85 acres site in Ballsbridge to Seán Dunne for €260 million and the second is the lack of enthusiasm for the sale of the extended Doyle and Beatty families who control around 30 per cent of the company.

The two issues are not unrelated. The decision to put the Ballsbridge site up for sale was seen as a way of fending off unwelcome predators such as Precinct. It is in many ways the jewel in the crown - certainly in terms of real estate value - and its redevelopment was seen as the prime objective of any prospective suitors who were primarily property developers. This certainly was true with respect to Precinct which is made up of Bryan Cullen, Dave Coleman, along with JJ Murphy and backed by the Reuben brothers.

Jurys' thinking presumably was that Precinct would either bid for the site directly, or lose interest in the company if someone else bought it. The cash raised from the sale would be distributed to shareholders, providing some compensation for those institutions that might have preferred an exit.

It seemed like a reasonable compromise, with the board striking a balance between the desires of the Doyle and Beatty families and the obligation to look after the interests of all the shareholders, which might have been better served by the sale of the group.

The first part of the plan worked pretty well. Seán Dunne came in with a very generous offer, considerably in excess of the price implied for the Ballsbridge site in Precinct's initial approach which valued the whole group at €960 million.

But the second part of the plan did not follow the script, with Precinct coming back with a complex two-tier indicative offer and then as of Friday a more straightforward offer at €17.50.

The first question, and the one uppermost in Dunne's mind, is where does the Ballsbridge site fit into the latest Precinct thinking. In theory it can block the deal as it requires approval by shareholders at an extraordinary general meeting. If it had not actually taken control by the time the egm comes around in the autumn, there are plenty of other mechanisms that it could use to ensure the resolution did not pass.

This is a real prospect and unsurprisingly reports are appearing that Dunne will launch a counter-bid for the whole company if Precinct tries to snatch back his prize. The chances are, however, that Precinct will not block the Ballsbridge deal. Dunne has paid a price that would make even members of the Precinct consortium gulp, and the cash will certainly not make its offer for the group any harder to finance. The Ballsbridge site is really more of a side show to the main feature, which is which way will the Doyle and Beatty families jump?

Precinct has already succeeded in isolating them within the boardroom. It would appear that a majority, or close to a majority of the directors, have come to the view that the interests of the two families now run counter to that of the other shareholders. No doubt they have been helped in coming to this view by talking to institutional shareholders who are happy to exit a good company in an increasingly problematic sector at a very fair price.

As the company's most recent trading statement made clear, the four-star properties in Dublin are showing their age and struggling to compete with new arrivals such as the Four Seasons. Meanwhile the Jurys Inn side of the business seems to be running out of road, with the new inns not performing as well as their predecessors.

Even allowing for a tactical use of black paint by the Jurys management, the reluctance of the Doyle and Beatty families to sell out against such a backdrop seems hard to fathom.Despite the long family attachments to the business, the emotional Rubicon of selling the family silver was crossed long ago by both groups. There have been suggestions that given the size of their stakes and other reasons, a sale would not be tax efficient and they might prefer a piecemeal break-up via which they might even acquire a few of the properties.

The explanation is probably somewhat more prosaic. They are well aware of the money that can be made by developing the company's property portfolio, but they can't see the sense in letting others do it, even if Jurys Doyle as currently strucutured can't capitalise on it.

But in many ways the reasoning behind the two families' positions is becoming irrelevant as the deal enters its endgame. By indicating that it will proceed as long as it gets a 50 per cent stake, Precinct has made the two families an offer they can't really refuse. The company is being bought one way or the other and the Doyles and Beattys can either stay on board and play ball - otherwise life will probably be miserable for everybody - or else they can take the money.

The question for the Doyles and the Beattys is whether Precinct is bluffing? The answer to that is another question. Does Precinct really want to try and run a business in which over 30 per cent is held by two families - and a rump of small private shareholders who have stayed on board for the ride - or will they walk if the two families say no? It's not over yet.