The executive leading the management buyout (MBO) bid for industrial group Barlo yesterday trenchantly defended its offer of 40 cents a share as the stock continued to trade above this figure on the back of purchases by investor Mr Dermot Desmond.
Mr Tony Mullins, principal of MBO vehicle Melgan and Barlo chief executive, stressed that its €70 million cash offer to shareholders was good value for the radiator and plastics group.
He pointed out that, in the 12 months before Melgan's intentions became known last July, the stock traded at an average of 21 cents.
Barlo closed at 41 cents yesterday, down one cent on its opening position of 42 cents. More than four million shares in the company changed hands at 41 cents. They were sold in two tranches, one of 3.6 million and the other 600,000.
The identity of the buyer, or buyers, was not known last night, but market sources speculated that Mr Desmond was again behind some or all of the purchases.
It emerged yesterday that Mr Desmond bought 2.2 million shares earlier this week at 41 cents, bringing his overall holding up to 7.7 per cent of the company.
He has been building a stake in Barlo through his companies, IIU Nominees and Bottin Investments, since details of the €70 million MBO offer were announced last week, when he bought a total of 2.48 million shares at 39 cents.
If he emerges as the buyer of yesterday's tranches, his stake will be more than 10 per cent.
On the basis of what he is known to have bought above the 40 cent offer level this week, Mr Desmond stands to be €120,000 out of pocket if Melgan is successful.
His activities have fuelled speculation that a higher offer may yet emerge for the group. Stockbrokers' analysts have valued Barlo at 45-55 cents a share.
However, Mr Mullins strongly rejected this yesterday. He pointed out that Melgan's offer, which in addition to the €70 million cash offer involves the bid vehicle assuming Barlo's €123.6 million average debt, amounts to almost €194 million.
He said that this was 5.6 times last year's earnings before interest, tax, depreciation and amortisation (EBIDTA).
He added that this was well within the earnings multiple that the analysts believed represented fair value.
