An eight-strong management team headed by chief executive Mr Tony O'Brien has completed the biggest buyout in the Republic with the £578 million (734 million) acquisition of Cantrell & Cochrane (C&C) from the British drinks group Allied Domecq.

The buyout has been backed with a debt/equity package by the British investment group BC Partners and the plan is to float C&C on the stock market within the next three years.

C&C will also be looking to expand through acquisitions and industry sources say that an early target could be the Tayto operation in Coolock, being sold by Beatrice Foods with a likely price tag of around £100 million.

The management team has an undisclosed equity stake in the new-style C&C and this stake will increase ahead of the flotation if what Mr O'Brien describes as "very challenging targets" are achieved.

Mr O'Brien declined to disclose the size of the management group's equity stake in C&C, but emphasised that the members of the group have put up funds for the buyout. However, the vast bulk of the £235 million equity element of the finance package has come from BC Partners.

If C&C does grow at the rate it has in the past and if the management group meets these "challenging targets", it is clear that its members will become extremely wealthy when C&C eventually floats on the stock market.

"All of us are investing our own money in the buyout and we will only get a decent payoff if we meet those challenging targets," said Mr O'Brien. It is understood that the five-strong board will be split three-to-two between C&C management and BC representatives, a typical boardroom structure in these buyouts.

The rest of the financing package consists of £270 million of senior debt - debt which has priority - provided by AIB and Donaldson Lufkin & Jenrette in the first euro-denominated syndicated acquisition financing in Europe. The financing also involves £85 million worth of mezzanine debt, higher-yielding finance which has a lesser priority. While some market sources felt Allied Domecq could have got more for C&C through a stock market flotation, a spokesman for the British drinks group said selling to the buyout group was a "bird in the hand". Sources have indicated, however, that at the very least a "handshake agreement" existed between Allied Domecq and BC before the recent surge in the markets and that Allied Domecq was, in effect, precluded from taking advantage of the renewed strength of the Irish stock market.

In any event, the £578 million price paid by the buyout group does not include the special dividend of more than £60 million that Allied Domecq is understood to have taken from C&C before the sale was completed.

In the year to the end of August, C&C had sales of £389 million (#496 million), a rise of over 6 per cent on the previous year. Operating profits last year were £52.1 million (66 million), again a rise of just over 6 per cent. Pretax profits and after-tax profits have not been revealed, but a full set of accounts is expected to be published by C&C next week.

Mr O'Brien conceded that C&C would begin its new life with a high level of debt, an unaccustomed position for the management, given the high level of cash the group has had on its balance sheet for many years. He said, however, that this debt position would not prevent C&C expanding.

"With our new partners, we will be able to realise our growth ambitions unfettered, both organically and through acquisitions," he said. "There is an unusually high level of equity in the financing, and the company has always been a strong cash generator. BC have said that it will support us in acquisitions and I believe that there is a lot of money out there for good projects. I'm certain we won't be inhibited in our search because of our level of debt."

Mr O'Brien said that, with the link with Allied Domecq now severed, C&C would not be prevented from looking for acquisitions in areas where its former parent company operates.

"We're now a lot freer to pursue our own agenda and I can see us expanding into areas like food distribution, which are aligned to our existing business."

He said that C&C also saw opportunities being created by the consolidation of the international drinks industry, with groups like Diageo selling off non-core brands.

He added that C&C could comfortably deal with an acquisition of more than £100 million. One possible purchase is the Greek drinks brand, Metaxa, with other opportunities likely elsewhere in Europe.

Mr O'Brien said C&C would continue to distribute Allied Domecq's products in the Republic and Northern Ireland, while it would use the British group's international network to distribute its own brands.

BC Partners director Mr John Burgess said: "C&C is a great business with a great track record, and has shown 20 years of consistent growth under the current management. It has a prominent position in the Irish market, good products and the Irish economy is going very well." He emphasised that financing for the deal was "conservative", with a 35 per cent equity content.