Directory services provider Conduit is the latest company to find itself in buyout talks with its management.
The group said yesterday that it had been approached about a possible offer at €2.83 per share by a management team led by chairman Mr Eddie Kerr and chief executive Mr Liam Young.
This represents a premium of around 33 per cent to Conduit's 90-day average share price of €2.12 on Frankfurt's Neuer Markt, where it has its primary listing.
Unusually, all three of Conduit's non-executive directors as well as the chairman are involved in the approach
As a result, Davy Corporate Finance Limited has been appointed as independent financial advisers to Conduit and will consider the offer on behalf of the company's shareholders. Legal advice will be provided by Mason, Hayes & Curran.
While not unprecedented, the situation is extremely rare and has caused some unease with one investor noting that Davy also acted as broker to the company.
Between them, the directors involved in the management buyout (MBO) approach own 49.7 per cent of Conduit, making the emergence of a rival bid unlikely.
Mr Kerr and Mr Young each own 21 per cent of the company while non-executive director, Mr Laurence Shields has 4 per cent.
Mr Shields, whose law firm LK Shields is advising the MBO team along with Goodbody Corporate Finance, has been a regular buyer of the company's shares in recent months. Another non-executive director, Mr Michael Tunney, has a 2 per cent stake while Mr Pat McDonagh, who is also backing an MBO approach at Riverdeep, holds the balance of the directors' shareholding.
Aside from the shares held by directors, Bank of Ireland Asset Management is the largest institutional investor with a stake of between 5 and 6 per cent while Capital Group owns 3.86 per cent.Funding for the bid is believed to be at an advanced stage.
Merrion Stockbrokers said that though the bid was not compelling, it was likely to succeed. "It's not a compellingly attractive price but there are substantial risks in the execution of their UK strategy," said Merrion analyst, Mr Rory Gillen.
He noted that following deregulation of the British market in August next year, the company must meet a number of challenges if it is to succeed in establishing itself as the second player behind the incumbent operator, BT.
In addition to seeing off the threat from a number of potential competitors, it faces advertising costs in the order of €18 million over the next two years if it is to secure its position in the UK market.
Conduit's shares rose by nearly 19 per cent to €2.60 on the Neuer Markt yesterday on news of the possible buyout but were unchanged in Dublin at €2.40. It is understood that the MBO approach was prompted by the disappointing performance of the share price, which is just a fraction of the June, 2000 flotation price of €16.00.
The lack of liquidity in the stock and the €1 million a year cost of running a publicly quoted company were other factors behind the decision.
