Time for Dunloe non-execs to earn their money

BUSINESS OPINION: The Encyclopaedia of Word and Phrase Origins by Robert Hendrickson (Facts on File, New York, 1997) says a Mexican standoff is "A stalemate, a confrontation that neither side can win. Originally an American cowboy expression describing a gun battle with no clear winner, the words date back to the mid-19th century."

A slightly different explanation is proffered in Western Words, New Edition (1968) by Ramon F. Adams. It claims Mexican standoff is a cowboy's expression for an escape from a serious difficulty. Early-day cowboys claimed, apparently, if a Mexican did not win quickly in a gun fight, or if he found much opposition, he left in a hurry. I am indebted to contributors to The Phrase Finder website (Phrase.shu.ac.uk) for both definitions which, it must be pointed out make some rather unfair allegations about Mexicans. Unfortunately neither really comes close to describing the messing about currently under way at Dunloe Ewart.

The extent of the bad blood between the company's two major shareholders, Mr Noel Smyth and Mr Liam Carroll, is now there for all to see. It has emerged in recent weeks that each man has turned down a proposal from the other aimed at resolving a two-year impasse.

Last May, Mr Carroll - who owns 27 per cent of the property company - is reported to have suggested that both men should make what were in effect sealed bids for one anothers stake. A minimum price of 51 cents was suggested, just 1 cent above the average price at which Mr Carroll bought his shares. Stock-exchange rules would have required the successful bidder to go on and buy out the other shareholders in the company.

Mr Smyth - who owns 25 per cent - is reported to have demurred and made a number of counter proposals. They include Mr Carroll selling his shares back to the company in exchange for the Dunloe's 50 per cent interest in the Cherrywood development in south Dublin. Mr Carroll did not bite and Dunloe has now decided to buy out British Land, the owner of the other 50 per cent of Cherrywood for €63.85 million. There is clearly little love lost between the two men, even though they are not supposed to have ever met. Following Mr Carroll's rejection of the Cherrywood proposal, Mr Smyth wrote to the director of Corporate Enforcement highlighting some aspects of the conduct of Mr Carroll's businesses.

It has also emerged that the financier Mr Dermot Desmond has taken an interest in the proceedings and holds a small stake through one of his investment vehicles. His objective is not clear at this stage, but he is not renowned for wasting his money and could well play a part in some attempt to break the impasse. He is unlikely to be in the Smyth camp as the two men are not thought to be close.

Another player in the drama is Mr Phil Monahan, a property developer. Mr Monahan owns just under 7 per cent of the company. Quite where he stands on the whole issue is also hard to discern.

What happens next is anyone's guess. The company could trundle on a bit longer or - sticking with western metaphors - there will be a show down. The next pressure point will come at the general meeting that will have to be called to approve the Cherrywood deal announced last Friday.

No doubt it will be an entertaining meeting but for the other shareholders in the company the situation has gone beyond a joke. It has been clear to them for a long time that they are caught up in a fight over what is arguably the finest development site in Dublin. Sir John Rogerson Quay in Dublin is the jewel in the Dunloe portfolio and the last really substantial undeveloped site near the city centre. It is directly across the Liffey from the IFSC and on the edge of Dublin 4.

Both Mr Carroll and Mr Smyth seem determined to ensure this valuable piece of property does not fall into the hands of their rival. Mr Carroll's involvement in Dunloe dates back to September 2000 when he bought into the company in order to block a move by Mr Smyth to take it private. He remains in a position to frustrate any move by Dunloe that requires a special resolution because such resolutions need 75 per cent support. He also appears uninterested in working with Mr Smyth and his proposal of last May indicates he either wants to be bought out or at least allowed to buy Mr Smyth out.

This appears to offer a solution to the deadlock and, on the face of it, the holders to the other 48 per cent of the company should welcome it. However it was not acceptable to Mr Smyth, who judging by the nature of his counter proposals does not want to - or can't afford to - buy out all the other shareholders as well, as required by the stock exchange.

If this really is the case then perhaps it is time from Mr Smyth to accept the inevitable and walk away from Dunloe and let Mr Carroll have it. He does, after all, have a responsibility as executive chairman to look after the interests of all the shareholders. It is coming close to the stage where he will face a conflict between this role and what is in his own best interest as a substantial shareholder and property developer.

It is also getting close to the time when the non-executive directors of Dunloe should take a more pro-active role in trying to resolve the impasse. It is understood that the issue of one of the non-executives opening a chanel of communications to Mr Carroll has already been broached, but met with little enthusiasm from the executive directors. The company is not short of heavyweight non-execs in the shape of Northern Bank chairman Sir David Fell, the Hong Kong-based entrepreneur Mr Brian O'Connor and Dublin-based auctioneer Mr Stewart Harrington. It is time for them to earn their €41,000 a year.