Unilever issues final Lyons offer

UNILEVER has given the 1,170 minority shareholders in Lyons Irish Holdings a "take-it-or-leave-it" ultimatum, with its declaration that its 323.3p per share offer was final and would not be increased.

Unilever has said that its offer will close on November 29th.

This "final offer" decision by Unilever does not come as a total surprise as the group's chairman, Irishman Mr Niall Fitzgerald, indicated last week in a magazine interview that he was not concerned about getting the outstanding shares and would be happy with 75 per cent.

It is understood that these comments by Mr Fitzgerald led Lyons and its advisers, KPMG Corporate Finance, to seek clarification from both Unilever's advisers, Morgan Orenell, and the Take-over Panel. The decision to declare the offer final came before any clarification was received.

The Lyons' board has previously recommended that the minority shareholders reject the Unilever offer, a recommendation that resulted in a negligible take-up by the minorities. Lyons has told shareholders to take no action pending further advice from the board but sources close to the company said that there would have to be "compelling reasons for the board to change its advice to reject the offer.

The Lyons' board had accused Unilever of ignoring the minority shareholders by its refusal to increase its 323.3p per share offer, even though Unilever got acceptances from just 0.26 per cent of Lyons' shareholders.

Unilever, in its statement yesterday, tacitly accepted that it will be left with a rump of minority shareholders. Market sources have said that Unilever will get some acceptances but not enough to be able to compulsorily acquire outstanding minority shares.

Unilever has to get acceptances from three-quarters of the 1,170 shareholders by number, and 80 per cent by value, to be able to compulsorily buy the outstanding shares. Market sources believe that institutional shareholders - the largest is Norwich Union with 3.7 per cent - are unlikely to accept the Unilever offer, while small shareholders are likely to be heavily influenced by the eventual recommendation from the board, likely next week.

Unilever Ireland's chief executive, Mr Jim Rice, said the continued existence of minority shareholders would not necessarily restrict Unilever as the majority shareholder. He would not be drawn, however, on what Unilever would do with Lyons's £51 million cash pile nor would he speculate on future dividend policy - two items of particular interest to minority shareholders.

Mr Rice also said Unilever would have no difficulty in working with the existing Lyons' management which has rejected the offer. "We have had one board meeting since we made the offer. That was a good meeting and we have also had a number of operational meetings. The issue of the minority shareholders is a separate issue from the operation of the company," he said.

However, by saddling itself with a rump of minority share-holders, Unilever will have to tread very carefully in the way it runs Lyons to ensure that they do not penalise the minority shareholders. If any minority shareholders feel that Unilever is acting against their interests, then Unilever could find itself faced with a claim alleging oppression of minorities.

In particular, these shareholders will be watching what Unilever plans to do with the cash pile. Unilever has already paid Allied Domecq £73 million for its 75 per cent stake in Lyons and would dearly love to use the Lyons cash to reduce the overall cost of the deal. That option of simply repatriating the Lyons cash for its own uses could conceivably lead to a challenge from the minority shareholders.

Lyons' shareholders will have the opportunity to make their views on the Unilever final offer known at the Lyons' annual general meeting on November 9th. In contrast to the minuscule attendances at previous Lyons' a.g.m.'s, next month's meeting of shareholders is likely to be a standing-room only event.