MINORITY shareholders in tea company Lyons Irish Holdings will today receive a detailed nine page statement from their board of directors, detailing the board's reasons for recommending that the 323p per share bid by Unilever should be rejected.
The letter from the board will tell shareholders that the 323p per share accepted by Allied Domecq for its 75 per cent stake is not a realistic price as Allied Domecq was a distressed seller. The letter will also draw attention to the multiple of nine times being offered by Unilever, when Lyons' cash pile is stripped out. It will also emphasise the absence of any premium to the current share price.
The board, advised by KPMG Corporate Finance, is not expected to put its own valuation on what Lyons shares are worth.
Unilever has already acquired Allied Domecq's 75 per cent stake in Lyons for 323p per share which valued the Allied Domecq stake at £76.4 million and the minority shareholders 25 per cent at £19.1 million.
Given the requirements of Irish company law which requires Unilever to get 80 per cent acceptances from the minority shareholders who own 25 per cent of Lyons, the Anglo Dutch foods group is likely to find it intensely difficult to get those 80 per cent acceptances which would allow it to compulsorily acquire the remaining Lyons shares.
Even though Unilever has said it can live with having shareholders - in much the same way as Allied Domecq was able to live with its 25 per cent minority shareholders, most industry sources believe Unilever will be keen to get 100 per cent control of Lyons.
That will undoubtedly require the current offer to be sweetened the only question is whether this will come from an increased offer for the 7.5 million shares held by the minorities; or through some mechanism such as a special dividend that would give the minority shareholders more money.
A precedent on special dividend was set earlier this year when the DCC controlled Flogas paid its minority shareholders a special dividend after it became evident that DCC's offer to the minority shareholders would be rejected. Flogas was similar to Lyons to in that it had a cash rich balance sheet.
One fund management group which invests on behalf of the smaller private shareholders Tilman Asset Management, has already suggested that a price in excess of 400p is warranted. Goodbody Stockbrokers, another group with a large number of private investors has also recommended that shareholders should reject the Unilever offer.
If Lyons Irish Holdings does decide that a special dividend should be paid to its shareholders, then every 10p of a special dividend would cost £3 million. Three quarters of any special dividend would, of course, go to 75 per cent shareholder Unilever, meaning that for every 10p of a special dividend, the minority shareholders would receive £750,000.
Alternatively and more simply, Unilever could simply decide to increase its offer to the minority shareholders.
