On August 28th, investors in Irish Continental Group (ICG) will vote on the €1.2 billion offer lodged on July 24th by a group of executives led by its veteran chief executive Eamonn Rothwell.
At this point, the offer is on the point of collapse amid strident opposition from a number of institutional shareholders.
In a statement published on Thursday, the independent board said that, based on early proxy votes, the bid is set to be rejected unless some investors have a change of heart. The statement smacked of desperation.
The race looks run, especially as Rothwell said earlier this week that he would not be increasing his €8-a-share offer.
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To succeed, the offer needs to carry 75 per cent of voting shareholders at the extraordinary general meeting next week.
Rothwell and the other executives are not allowed to cast their near 24 per cent shareholding so the bar is high to approve the deal.
To complicate matters for Rothwell, Glass Lewis – the influential shareholder advisory group – has recommended rejection of the offer. Earlier in the week, rival ISS recommended a vote in favour of the deal.
How come Rothwell (71) did not have a Plan B in the event of shareholder dissent? His €8-a-share offer was easy to understand and easy to sweeten in the event of shareholder resistance.
If the offer is rejected, what next for ICG?
Given his age, Rothwell must be looking at an exit event. By all accounts, the company and its advisers have spent much of the past couple of years shaking the trees for potential interest in the business without joy.
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So perhaps Rothwell put together this offer as a runway to exiting the business and cashing in his chips. Work hard for, say, three years and then flip the business to a trade buyer or private equity.
Will he quit if the deal is rejected? Given the size of his shareholding (he owns 21.7 per cent, worth about €225 million currently) probably not, but it is possible. This is a risk for investors given that Rothwell is every bit as important to ICG as Michael O’Leary is to Ryanair for strategic leadership.
This would be his second failed attempt to acquire the ferry operator. Given his age, a third punt seems unlikely.
More likely he would seek to sell his shares. Given the size of his stake, this would not be easy to execute in one fell swoop and is unlikely to achieve €8 a share.
In its statement on Thursday, the independent board made clear that a rejection of the offer would likely see the share price revert to the €6.24 level it was at on the day the bid was announced.
Its shares in Dublin are currently hovering around the €7 mark.
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Looking at the business itself, ICG’s interim results, published this week, were a mixed bag. Its revenues and Ebitda (earnings before interest, tax, depreciation and amortisation) both rose but its pretax profit fell by 2.9 per cent.
ICG also flagged that car and freight volumes have declined in the period from July 1st to August 15th, reflecting weaker demand. This is a worry given that two-thirds of ICG’s revenues are earned in the second half of the year.
Oil prices continue to nudge upwards in the absence of a peace deal between the United States and Iran, and the fleet will also need a refresh in the near term. So there are headwinds facing the company.
Rothwell has skilfully steered his way through the effects of recessions, wars, Brexit and a pandemic. Preventing his takeover bid from sinking is shaping up to be his biggest test yet.
