Sherry FitzGerald MBO team proposes €1.95 offer

The management team at Sherry FitzGerald is proposing to make an offer of €1.95 per share for the company, a level which the independent directors have said they are prepared to recommend.

However, the proposed offer is subject to the finalisation of funding and due diligence, and does not represent a firm intention to make an offer for the company, the property group said.

In the event that the offer becomes unconditional by the end of June, the proposed final dividend of three cents per share, announced yesterday, will not be payable.

Shares in the company closed 10 cents higher at €1.70 last night.Analysts said the proposed offer faced few obstacles given that 64 per cent of the shares are held by management and staff.

The recommendation by the company's three non-executive directors means an offer is also likely to receive the necessary acceptance from Bank of Ireland Asset Management (BIAM), which holds around 12 per cent of the shares, according to Dolmen Butler Briscoe.

Dolmen's head of equity research, Mr Stuart Draper, is advising clients to accept the €1.95 offer, which he believes is reasonable.

He said it represented a substantial premium to where the shares would otherwise be trading. It is 60 per cent above the €1.22 level seen the day before the offer was announced.

He also notes that the multiple, at six times historic earnings, is broadly in line with the British estate agency sector, which is trading on a multiple of seven times.

In addition, the price is broadly in line with the flotation price of €1.99 four years ago.

"A lot of other companies have gone private at a lot less than the IPO price," he noted.

Meanwhile, Sherry FitzGerald reported a strong set of results for 2002 yesterday.

Pre-tax profits more than quadrupled to €6.6 million, while turnover rose 32 per cent to €30.2 million, helped by the return of investors to the property market following changes to tax treatment and stamp duty in the 2002 Budget.

"The increase in turnover was largely fuelled by the increase in activity in the residential new and second-hand market, which saw a 47 per cent increase during the 12 months," chief executive Mr Mark FitzGerald said.

The number of new homes sold last year jumped by 95 per cent to 4,866 units, while second-hand sales recovered to 1,478 units from the low of 1,251 seen in 2001, he said.

The company's commercial arm, DTZ Sherry FitzGerald, faced a more difficult market, however, recording an increase of just 1 per cent in turnover.

Sherry FitzGerald increased its distribution network to 78 locations in the Republic by the end of last year and has opened aadditional five offices to date this year. By the end of last year it had eliminated its debt.