A claim by Dublin accountant Mr Neal Duggan that the recent acquisition of the Fitzwilton company was not made at "arm's length" was rejected by a High Court judge yesterday.
Mr Duggan, of Shrewsbury Road, Dublin, has 10 ordinary shares in Fitzwilton. These were the only shares out of a total of 273,573,910 ordinary shares not acquired by a British Virgin Islands registered company, Stoneworth Investment Ltd.
Mr Duggan asked the court to look at "the real identity" of the bidder involved. It was clear, he claimed, that "the real active substantive owners" was a consortium of three directors of Stoneworth, including the Fitzwilton chairman, Dr Tony O'Reilly.
In his judgment, Mr Justice Peter Kelly said the "pith and kernel" of the claim by Mr Duggan was whether the offer for the shares was fair and reasonable.
In so far as the valuation of 50p per share was concerned, it seemed that the offer for Fitzwilton had been accepted by the holders of the overwhelming majority of ordinary shares in the company and that included the overwhelming majority of shares not owned by the principals in Stoneworth, the judge said.
Those accepting the offer included every major institutional holder of shares in Fitzwilton and those holding in excess of 100,000 shares.
Mr Justice Kelly said that in deciding whether the offer was fair and reasonable the court was entitled to take into consideration that Mr Duggan, as the owner of 10 shares, had been the only person to come to court making this complaint.
The court was also entitled to take into account that the bid had been accepted by all the independent directors of Fitzwilton and had been recommended by independent advisers to the independent directors. The offer was a significant premium over the then market price and it was legitimate to bear in mind that the bid was independently recommended by NCB.
Mr Duggan, who conducted his own case, said in an affidavit that the Stoneworth shareholders were Dr O'Reilly, chairman of Fitzwilton (100 shares); Mr P.J. Gouldandris, a director of Fitzwilton (100 shares) and Mr L.L. Glucksman, a non-executive director of Fitzwilton (four shares).
He said Dr O'Reilly and Mr Goulandris were Stoneworth directors and that the company's sole activity related to the making of offers for Fitzwilton.
Mr Duggan said that on May 5th last the Fitzwilton board announced discussions were taking place which could lead to a 50p offer for ordinary shares. These discussions were taking place with a "consortium" led by the families of the three Stoneworth shareholders.
Mr Duggan said that while ostensibly the offer was on behalf of Stoneworth, it was "effectively and in substance" on behalf of the consortium.
The offer document had named Deutsche Morgan Grenfell (DMG) as having advised the Fitzwilton independent directors. The document disclosed that DMG acted as financial advisers to Fitzwilton. He said he believed DMG was not in a position to provide independent advice.
Mr Paul Gallagher SC, for Stoneworth, read an affidavit in which Mr Barry Michael Cass, a US legal adviser to Stoneworth, said the offer had been fair and reasonable and was regarded as such by the overwhelming majority of shareholders who accepted it.
Mr Cass also claimed that, following a two-day hearing, the Takeover Panel had decided that the independent directors of the company who recommended acceptance of the bid had acted faultlessly.
Mr Cass said that by 1997 Fitzwilton had essentially become a holding company for three principal investments - Waterford Wedgwood plc (16.34 per cent); Rennicks Group (76 per cent) and Safeway Stores Ltd (50 per cent).
It was perceived that as it had become a mere holding company its appeal as a listed company was extremely limited and it might be appropriate that shareholders be given the opportunity to realise their investment.
Mr Cass said Mr Goulandris and Dr O'Reilly began to consider the possibility of taking the company private by launching a bid for its shares. As privatisation was an option which could involve Dr O'Reilly, Mr Goulandris, Mr Glucksman and their families, the three men elected not to attend a board meeting which discussed strategic alternatives.
The directors at that meeting constituted independent directors of Fitzwilton, who appointed DMG as advisers. He had been advised the bid had to be made by a "corporate" body and it was decided to avail of Stoneworth. At all times the interest of the three men in Stoneworth was disclosed.