Pension fund blocked from Arnotts bid

Arnotts pension fund has been blocked from participating in the bid by family interests to take the retailer private, writes Dominic Coyle

The pension fund, which is the largest single shareholder in the group with a 12.8 per cent stake, had negotiated a seat on the board of the private company should the deal be successful in return for an equity investment of around €5 million. However, the Irish Takeover Panel has ruled that the pension fund cannot get involved in the takeout being organised by director Mr Richard Nesbitt and chairman Mr Michael O'Connor.

It is understood the panel felt the involvement of the pension fund in helping finance the deal would place it in a more favourable position than other shareholders.

The pension fund has nevertheless given an irrevocable undertaking to support the offer being made by Nesbitt Acquisitions at €14.2625 per share inclusive of the proposed final dividend.

Mr Nesbitt last night announced it had secured undertakings from holders of almost 52 per cent of the stock for the offer, which has been recommended by the independent directors.

Apart from the 12.8 per cent owned by the pension fund, these include the 1.3 per cent holding owned by the three directors on the independent committee, and the 18.9 per cent owned by Nesbitt and O'Connor family interests. It has also secured the support of 3,314,531 shares, amounting to 18.6 per cent of the company held by institutions and private shareholders.

Mr Richard Nesbitt last night said he was pleased with the mix of institutional and private support the bid had received: "We have put a lot of work into this and it is very gratifying that it has been well received." He said it was "a matter of deep regret" that the pension fund had been disbarred from joining the bid team but vowed to continue working with staff to secure their involvement in the future of the company if the bid is successful.

Mr John Douglas, a national officer with Mandate, the union that with SIPTU represents Arnotts staff, said the pension trustees and the staff were fully supportive of the Nesbitt bid. "However, we are disappointed at the decision of the Takeover Panel as we believe the arrangement reached with the Nesbitt team would have offered staff the opportunity to participate in the company going forward."

The absence of the pension fund cash does not seem to have presented any problem for the Nesbitt/O'Connor team. Apart from the money that will be reinvested by family members and the loans arranged with Anglo Irish Bank, a number of private Irish individuals have come forward to fund the balance of the €257.3 million deal.

Mr Nesbitt said his group was keen to move the process forward as quickly as possible. "We need to get this finished as quickly as possible so that the company can move forward."

Mr Brian Davy, chairman of the independent directors' committee, said there had been a number of approaches for the company apart from the Nesbitt and rival Carrgran bids but that these had come very late in the day and had not developed into anything substantive.

"Following the uncertainty of the last few months, we are pleased to have reached a position where an offer is to be made at a level that we have deemed adequate to recommend to shareholders for acceptance."

Arnotts is one of the oldest companies on the stock exchange and the shares are very tightly held. Average daily turnover is just 9,000 and many of the shares are passed from generation to generation. Institutional involvement is limited, with just Fidelity, Bank of Ireland Asset Management and Jupiter Asset Management holding significant stakes. Jupiter has been a seller in recent days.

The formal offer document will be sent to shareholders within two weeks.