Mr Dermot Desmond's investment company, International Investment & Underwriting, has made a profit of over £3 million on its investment in Golden Vale, after selling its entire 8 per cent shareholding last Friday.
The decision comes after a strong run by the shares, up from 81p at the end of 1997 to 110p at yesterday's close. It also puts an end to speculation that Mr Desmond's investment in Golden Vale was a strategic one aimed at forging a merger between Golden Vale and Dairygold. Mr Desmond's decision to sell at this stage seems nothing more than profit-taking after a very timely investment.
Mr Desmond's decision to sell his holding at a sizeable profit will inevitably focus attention on the other public companies where his IIU company has a stake and where it is also sitting on an unrealised profit.
These include IIU's 18.7 per cent stake in Unidare and the 3.3 per cent stake in Barlo, as well as a 3.5 per cent stake in Jones Group.
The 12.5 million Golden Vale shares were sold to a group of Irish institutions - headed by Standard Life and Scottish Provident - at a price of 105p per share. This compares with the estimated average price of 75p-80p paid by IIU, as it built up its shareholding over the past two years.
Standard Life is now the biggest shareholder in Golden Vale with just under 6 per cent of the total equity, having previously not had a shareholding above the 3 per cent disclosure level. This suggests that Standard Life bought over five million of the 12 million shares sold by IIU.
Scottish Provident was the other big buyer, taking on 4.5 million additional shares to nearly double its stake in Golden Vale from 2.9 per cent to 5.4 per cent. This buying by the institutions at close to the recent high is a strong vote of confidence in the shares by the investment community.
It is also the second time in the space of three months that a large shareholder has sold its entire stake in Golden Vale. Last October, Royal & Sun Alliance - at that time the second-biggest shareholder after IIU - sold its entire 5 per cent stake at 75p per share and as a result is nursing a considerable paper loss. The sale of the IIU stake to Irish institutions comes a couple of days ahead of Golden Vale's full-year results, which are expected to show a strong recovery in profits to between £14 million and £15 million.
After the dreadful 1996 when the group was hit by a £3 million EU superlevy fine and dismissed chief executive Mr Jim O'Mahony, Golden Vale has staged a remarkable recovery. The market believes that the group is well placed to become a broader-based company, especially if its £15-£20 million bid for the Rye Valley convenience goods groups is successful.
The 1997 results, due tomorrow, are expected to show strong growth in the group's processed cheese operations, while milk and other dairy products are expected to report a good performance. Golden Vale's Cheesestrings snack foods product has been a huge success and analysts expect this product alone to contribute £400,000 to profits where it was initially expected to do no more than break even.
