Smyth's move may be an attempt to flush out a higher offer for Dunloe, writes Jane O'Sullivan.

Noel Smyth's offer for Dunloe Ewart is seen as the opening shot in a fresh attempt by the company's executive chairman to break the log-jam that exists at the firm.

Having failed in his attempts to buy out Liam Carroll or sell out to him, analysts believe Mr Smyth is trying to flush out a higher offer for Dunloe in a bid to bring to an end the impasse which is damaging the company's prospects and hitting shareholder value.

As it stands, Mr Smyth's offer seems unlikely to succeed.

His bid vehicle, Valdot, needs 80 per cent acceptances before it can proceed to compulsorily acquire all the shares in the company and take control. While Mr Carroll, the company's largest shareholder, could not be reached for comment yesterday, he seems unlikely to accept the 42.5 cent per share cash offer. Having already scuppered several of Mr Smyth's initiatives - including an attempt to take the company private at a price of 51 cents per share two years ago - few people expect him to accept an offer that leaves him sitting on a loss of up to €8 million on his Dunloe shares.

It is also far from clear that the bid will be accepted by two of Dunloe's other large shareholders, Mr Phil Monahan and Mr Dermot Desmond, who between them own around 9 per cent of the company.

With shareholders representing 37 per cent of the share capital potentially hostile to the bid, full control of Dunloe seems likely to elude Mr Smyth. In the words of one observer, the offer looks to be "fatally flawed". Even if Valdot was to waive the 80 per cent acceptance requirement - and it is understood that it would consider doing so if the volume of acceptances from small shareholders was very high - Dunloe would still face the problems caused by the existence of two rival camps.

Mr Smyth could attempt to take Dunloe private if he gained majority control, but analysts consider this would be an uphill battle. "It's very hard to do," said Mr Peter Horgan, analyst with Goodbody Stockbrokers. "Stock exchanges don't like it and it can be a very long drawn-out process."

Shareholders unhappy with such a move would also have the option of taking a Repression of Minority Interests case to the High Court to prevent a de-listing.

However, Mr Smyth's move is seen as having put the company into play. More than 21 million Dunloe shares traded yesterday, closing 19 per cent higher at 43 cents per share, just above the offer price as the market speculated that a higher bid might be forthcoming from some quarter.

It also provides the company's beleaguered small shareholders, who have been caught in the middle of the battle between Mr Smyth and Mr Carroll, with some glimmer of hope.

Whatever happens between the company's two main protagonists, at least for the small shareholder an exit mechanism is now in sight.