Madison Dearborn likely to succeed in acquiring IPL

Given that two-thirds of shareholders have to vote for it at the end of next month, it would be wrong to say that IPL Plastic's €356 million sale to US investor Madison Dearborn is a penalty kick.

However, news yesterday that an exercise designed to flush out a better offer failed to find one means that this deal looks more likely to succeed than when first announced in July.

Madison Dearborn is offering $555 million Canadian dollars (€356 million) for Irish Canadian plastics maker, IPL. The $10 a-share bid is a 150 per cent premium to IPL's price in May, before rumours of a bid began circulating, and a 69 per cent premium on the average at which the company traded on the Toronto Stock Exchange for 20 days up to July 28th.

The offer included an unusual “go-shop” clause that allowed IPL 30 to 40 days to establish if others were prepared to pay more for the business. Advisers hired for the job approached 57 likely bidders, 14 of which expressed interest. However, having run the rule over the company, they decided against bettering Madison’s offer.

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Expired

The go-shop clause has now expired. This means that shareholders will decide whether or not to back the sale to Madison, which the the board is recommending. They will vote at a meeting on September 28th, 66 per cent or more of the company’s owners will have to support the deal for it to go through.

That will include Irish shareholders, some of which have had a stake in the company since it was spun out of the IAWS food and agri-business group. Businessman and solicitor, Noel Smyth, whose Fitzwilliam Investment Corporation is a backer, indicated in June that many of this group favoured finding a buyer to help arrest the decline in its shares.

While $10 Canadian dollars is 26 per cent short of IPL’s flotation price of $13.50 in June 2018, it is still a considerable premium to its more recent quotes. Shareholders may well decide to back it on that basis of that, and that the go-shop clause appears to have established that no better offer waits in the wings.