Business Opinion John McManusIt is not every day that Dermot Desmond gets called a white knight. While the financier's motivation may not be entirely altruistic, the small shareholder who so ennobled him at last week's extraordinary general meeting of Barlo has reason to be grateful.
The intervention by Mr Desmond - or more accurately his International Investment and Underwriting (IIU) and Bottin Investments - in the Barlo management buyout prevented the company going the way of Riverdeep, Alphyra and, most spectacularly, Eircom.
All three were taken off the market by investors - and in the case of Riverdeep and Alphyra, members of the management - who held themselves out as doing everyone a favour. The companies, we were told, were all unloved by the market and nothing much was going to happen in the short term which would change this.
The best thing for all concerned, or so the story went, was for the management and new investors to buy the company and battle on under private ownership. The final part of the pitch was that the challenge facing the new owners was so immense and the risks so daunting that there was no way they could be expected to pay the sort of prices being suggested by independent analysts as representing full value.
With the benefit of hindsight this all seems, at best, disingenuous. The members of Valentia have now exited Eircom after just over two years, more than doubling their money in the interim.
Riverdeep is in the throes of a bond issue and refinancing which will see Alchemy Partners and MDS Private Equity double their money and exit after a year. The company - which was taken private at $1.51 per share - is now worth $3.40 a share according to Davy Stockbrokers. This still leaves plenty of jam for Barry O'Callaghan and Pat McDonagh who are buying out the venture capital funds at $2.34 per share.
A fresh valuation has yet to be put on Alphyra - taken private last year at €2.70 - but it would be something of a surprise if it did not exceed that figure.
The jury is still out on Alphyra, but it seems pretty clear that both Valentia and Hertal - the Riverdeep buyout vehicle - substantially underpaid for the companies they bought. In both cases they were able to do so because no-one shouted stop.
Nobody else even bid for Riverdeep while the rival bid for Eircom from eIsland only offered a fraction of a cent more and was effectively dead in the water because the Employee Share Ownerhsip Trust did not support it.
Something similar seemed to be about to go down at Barlo with Tony Mullins's 40 cent per share offer the only deal on the table for a business valued by analysts at up to 55 cent per share. That was until IIU and Bottin started buying shares at 42 cents, accumulating a 17 per cent stake on the basis, presumably, that one way or another there was better value than 40 cents to be got out of Barlo shares.
Their gamble appears to have paid off sooner than they might have expected with Seán Quinn coming forward with a 48 cent share offer.
It would be naive to think that IIU was driven by anything other than cold logic and the desire to make money but, fortuitously for small shareholders, what was good for IIU was good for them.
It is not quite a tale of chivalry then, but it raises the intriguing prospect of something similar happening at Baltimore Technologies - a company once dear to Mr Desmond's heart. As one of the original backers of the internet security firm, Mr Desmond made millions out of the company prior to its fall from grace.
Acquisitor, the Bermuda-based venture fund, is currently trying to take control of the company by the backdoor. It has requisitioned an extraordinary general meeting in May at which it will seek to have the current management team - headed by Bijan Khezri - thrown out and replaced by some of their own people.
The 45,000 shareholders who own the other 90 per cent of Baltimore will hear a lot of chat over the next few weeks about who has the best strategy for the company and who is to blame for its collapse from a £5 billion FTSE 100 stock to a shell with a market cap of less than £25 million.
The reality is that Acquisitor and the existing management are fighting over its cash pile of up to £30 million which, when put together with its full quote, is quite an attractive asset. Particularly if you can pick it up for the less than £3 million that Acquisitor spent building up its 10 per cent stake .
It would be another in a long series of blows for Baltimore's shareholders if Acquisitor does get to pick up control of the company on the cheap. And it is quite possible that it will as it only needs a simple majority of the votes cast at the e.g.m. to dump the current management and install its own team.
Unless of course a white knight appears. Time for Sir Desmond to mount his trusty steed once more?
