Woodchester vehicle for GE Capital in Europe

Woodchester Investments is expected to become the spearhead for a major expansion of GE Capital's asset finance operations in Europe, once the £591 million takeover of the Irish group is completed. The £591 million takeover is the biggest yet of an Irish public company.

But the American finance group may face the opposition of some of the Woodchester institutional shareholders who feel that the 263p a share offered undervalues the Irish company, especially in a takeover. The absence of a counter-bidder, however, may force the shareholders into accepting the bid.

The recommended offer by GE Capital of 263p per share was reached after negotiations that went on for most of Monday night and brings an end to a six-month process started last March by Woodchester's majority shareholder, Credit Lyonnais.

The sale of its 53.7 per cent shareholding by Credit Lyonnais is part of a programme of asset sales to ensure EU agreement for its rescue by the French government. And, while Credit Lyonnais will realise £317 million from the sale, minority shareholders - mostly Irish institutions - will receive £274 million.

Institutional shareholders in Woodchester expressed no great joy at the takeover offer from GE Capital, but conceded that with Credit Lyonnais having already accepted 263p per share, the prospect of a counter-bidder paying more are non-existent.

"It's not very generous and I think they should be paying more, but there doesn't seem to be anybody else out there to pay more," commented one fund manager. Over the past six months, various potential buyers have been mentioned, including the financing arms of Ford and ATT, as well as ABNAMRO and Woolwich. But at the end of the process, only one bid was on the table.

Another fund manager felt that while GE Capital was paying a reasonable multiple of earnings for Woodchester, 263p a share does not include any premium for a complete takeover. Riada analyst, Mr Eamonn Hughes said, however, that while the price offered by GE Capital was not "wildly expensive", it was still above average for the sector.

Woodchester shares had risen as high as 295p earlier this year after it was confirmed that the Credit Lyonnais stake was for sale. But as negotiations with various parties advanced, it became clear that nobody was willing to pay three times book value for Woodchester and that Credit Lyonnais and the other shareholders would have to settle for substantially less.

The 263p per share being offered by GE Capital is a multiple of 17 times Woodchester's 1996 earnings and 2.6 times the Irish group's book value. On this basis, it seems that that GE Capital is paying a reasonable multiple for a company like Woodchester.

GE Capital has to get the support of 80 per cent of the minority shares by value and 75 per cent of the minority shareholders by number to be able to compulsorily acquire the remaining shares. The attitude of Scottish Provident - which holds 3.3 per cent of Woodchester may be pivotal.

The institution's Irish fund manager, Mr John Lawrie, has been vocal in the past about what he saw as Irish public companies being taken over on the cheap, and in the case of one bid - DCC for Printech - threatened to go to court to prevent his shares being compulsorily acquired.

Neither Woodchester chairman, Mr Craig McKinney nor GE Capital president, Mr Chris Mackenzie were available yesterday to comment, but in a statement, Mr McKinney said: "The size, strength and geographic coverage of GE Capital makes it ideally placed to enable Woodchester to continue to build its business and increase its profitability."

Mr Mackenzie said: "The combination of will enable the enlarged group to provide even better services to its existing customers over a broader geographical area by utilising the resources, technology and service expertise of GE Capital."

A spokesman for GE Capital at its Connecticut headquarters said it was too early to say how Woodchester would be merged into GE Capital and whether any of the existing Woodchester business in Britain would be absorbed into the American group's business in Britain. In Ireland, there is no overlap with Woodchester, which is the largest motor finance company. GE's Irish business includes the CFI insurance group as well as GECAS, the vehicle used by GE Capital when it rescued GPA four years ago.

GE Capital has assets of $227 billion and has 27 financial services businesses operating in 21 countries, including most of western Europe. Its main business is motor and equipment finance and consumer services such as motor leasing, credit cards and home mortgages.