The Quinn Group is on the verge of taking over Barlo plc after offering €84 million for the company, €14 million more than a controversial management buyout (MBO) bid.
Sarcon, a Northern Ireland-registered subsidiary of the Quinn Group, announced at midday that it would offer 48 cents a share or €84 million for Barlo. That figure is €14 million or 20 per cent higher than the 40 cents a share/€70 million tabled last month by Melgan, the MBO vehicle led by Barlo chief executive Dr Tony Mullins and backed by executive board members and members of the Barlow family.
Shares in the radiator and plastics group soared as high as 50 cents at one stage yesterday following the news. They closed at 48 cents, more than 6 per cent up on Monday's close of 45 cents.
Another Quinn company, Quinn Group Family Properties, bought 22.6 million Barlo shares, increasing the group's total stake to 29.95 per cent. It will need a further 50.5 per cent of Barlo for the offer to succeed.
The Melgan offer was finally killed off last night when Barlo's independent directors, Mr Niall Carroll and Mr John Farrell, announced that they intended to recommend the Sarcon bid to shareholders.
In a statement, Mr Carroll and Mr Farrell said they "intended unanimously to recommend that Barlo shareholders accept the offer". Last month, they recommended the Melgan bid. Melgan did not comment yesterday.
Barlo published details of the MBO offer on February 10th, but analysts immediately said underpriced the firm. They argued that 45-55 cents offered fairer value. They based this on Barlo's reported debts of €115 million and an industry valuation of 5.5 to 6 times earnings before interest, tax, depreciation and amortisation (EBITDA).
But Dr Mullins and the independent directors, and the advisers to both sides, AIB Corporate Finance and IBI Corporate Finance, said the company's average debt was €123.6 million. Melgan planned to buy this out along with the cash offer, bringing its final bill to almost €200 million. They said that taking this into account, the offer was within the 5.5 to 6 times EBITDA range. Barlo's estimated EBITDA for 2003 is €35 million, more or less in line with its performance in 2002.
Sarcon's offer states bluntly that its board "believes the Melgan offer does not offer fair value for Barlo shareholders".
Quinn Group is a private company controlled by Cavan-based businessman Mr Sean Quinn. It has interests in cement, glass, hotels, building materials, insurance and stockbroking.
It entered the Barlo fray in a surprise move last Friday when it bought 14.63 per cent of the company from IIU Nominees and Bottin Investments, two companies owned by investor Mr Dermot Desmond. The group already held 2.4 per cent of Barlo through its insurance arm, Quinn Direct.
Between the announcement of the Melgan offer in February and early last week, Mr Desmond had increased his stake in Barlo from 4.9 per cent to 19 per cent. He bought most of the shares at an average of 42 cents, two cents over the price offered by the MBO.
NCB Corporate Finance handled Mr Desmond's sale to Quinn. The group holds 20 per cent of the stockbroking firm, which it bought last year from Mr Desmond for an estimated €4 million. Sarcon has no stake in Barlo, but it can be assumed the Quinn firms which hold 29.95 per cent of Barlo will automatically accept its offer.
Melgan's deal depended on a parallel de-merger of Barlo subsidiary Athlone Extrusions. That firm's management had planned to buy Athlone and two Barlo plastics plants for €68 million. But it is understood that the Quinn Group intends buying all Barlo businesses, and has no plans to sell Athlone Extrusions.
