Shareholder opposed to Crean's bid

ONE of James Crean's institutional shareholders has come out strongly against the proposed bid for the outstanding shares in Inishtech, believing that it would push Crean's debts too high.

Crean yesterday confirmed its 550p per share offer for the outstanding 28.2 per cent of Inishtech, valuing the industrial holding company at over £90 million and costing Crean £26 million for the outstanding shares.

Inishtech shares trade yesterday at 560p. Crean closed on 230p, up 23p on the last traded price.

The Crean institutional shareholder, who asked not be named, said: "It would be much better if Crean did not bid for the rest of the stake in Inishtech. They tried a couple of years ago, but the price now wouldn't be right. It would also mean their gearing would be far too high.

"If they don't bid and manage to sell off some of their stake, there would be no reason to be negative on Crean, except that general industrial holding companies are not very popular these days, and with good reason," the institution said.

In its statement confirming the bid, Crean said the proposed purchase and subsequent sale of a wholly owned Inishtech is part of a strategy to concentrate on its core business. "Crean decided to explore the option of selling its holding in Inishtech. However, Crean concluded that a sale of its holding could be a difficult and very protracted process while Inishtech remained a separately listed company and that the position of the minorities would remain unsettled during a long and uncertain process.

In response, Inishtech said a special board meeting would be convened to discuss the Crean bid. Following that, the independent directors headed by chairman Mr Tom Toner likely to make a recommendation, to shareholders on whether to accept or reject the bid.

It was the independent directors who insisted on a cash alternative to a proposed all share bid from Crean two years ago.

Sources have told The Irish Times Crean decided to make its bid after an "indicative" bid from Clondalkin Group for Crean's majority stake in Inishtech fell substantially short of what Crean felt its stake is worth.

But market sources, including some of Crean's shareholders, feel the strategy of taking full control of Inishtech with the aim of selling it on is dangerous, and also cited the pressure it would put on Crean's balance sheet.

Crean is expected to have a 1995 gearing of around 21 per cent when it announces its results, but this excludes £35 million of convertible shares which many feel should be treated as debt. Add in £26 million for the Inishtech minority shares and Crean's gearing could rise to well over 80 per cent if those convertibles are treated as debt.

Crean paid around 350p per share or around £41 million for its current 71.2 per cent stake in Inishtech and will pay 550p per share, or £26 million for the remaining shares.

This indicates an average purchase price of 396p per share if the current bid succeeds, or a total of £65 million paid by Crean. This begs the question of whether Crean would sell a wholly owned Inishtech for less than the 550p per share it is now proposing for the minority shares.

Crean said yesterday it had received "unsolicited expressions of interest" in relation to its holding in Inishtech.

The market itself has not really taken a view on the bid.