UNILEVER'S plans to acquire the minority shareholdings in Lyons Irish Holdings have received a serious setback following the decision of two groups which manage private client funds to recommend that their clients reject the 323p per share offer.
Yesterday, Tilman Asset Management - the company set up by former Goodbody Stockbrokers director Mr Ray Tilson - said that the Unilever offer is unacceptable. It is also understood that Goodbody Stockbrokers has also written to clients urging them to reject the Unilever offer which values the 25 per cent minority shareholdings at £19.1 million and values Lyons in its entirety at £76.4 million.
Last week, after the Minister for Enterprise and Employment, Mr Bruton, gave clearance to the bid after a recommendation from the Competition Authority, the Anglo Dutch group agreed to pay 323p per share for the 75 per cent of the shares held by Allied Domecq. Since that element of the takeover was completed, Unilever has made a public offer of 323p per share for the minority shares but may now be facing an uphill task in getting enough acceptances from the minority shareholders to compulsorily acquire any outstanding shares.
Lyons itself has urged the minority shareholders to take no action on the Unilever offer and has enlisted the services of KPMG Corporate Finance to advise on the Unilever offer. Mr Matt Minch, of Tilman Asset Management, said that his group will be writing to the Lyons board expressing their disapproval of the terms of the Unilever offer.
Mr Minch told The Irish Times yesterday: "Our view is that Allied Domecq was a distressed seller and Lyons was sold at a price which seriously undermines the company. A price of over 400p per share would be more realistic."
When Unilever announced last week that it had acquired the 75 per cent of Lyons, owned by Allied Domecq, there was strong speculation that Unilever would have considerable difficulty in buying out minority shareholdings at 323p per share. While this values Lyons at £95 million, that valuation also includes Lyons's cash hoard of over £45 million.
While Unilever could live with minority shareholders in Lyons in the same way as the Allied Domecq did for many years, there are many reasons why Unilever would like to get to a position where it can compulsorily acquire outstanding shares.
To do this, Unilever will have to obtain acceptances in respect of 80 per cent of the minority share - meaning that it will have to increase its stake from its current 75 per cent to 95 per cent to be able to compulsorily acquire the remaining shares. Minch said that he believed that sufficient shareholders would reject the Unilever offer to prevent compulsory acquisition.
Taking over Lyons in its entirety would cost Unilever over £95 million and that is why Lyons's £45 million cash hoard is so attractive. But if Unilever is left with a rump of minority shareholders in Lyons, then the multi national might have to tread carefully in how it deals with the cash hoard.
If Unilever attempted to transfer the Lyons cash to its own balance sheet, then it could possibly face a challenge from minority shareholders who might feel that such an action constitutes oppression of their position.
As one market source put it: "Many of the smaller shareholders know that they have a nuisance value. If Unilever wants to get rid of the nuisances, then it may have to pay more, than 323p per share.
