Business Opinion:The battle for Irish Continental Group appears to be only just getting going as far as the market is concerned. The shares closed around €22.50 on Friday, some 50 cent ahead of the highest bid currently on the table, and hedge funds continue to buy the stock at these levels, writes John McManus

But given that the €22 per share bid from the Phillip Lynch-led Moonduster consortium appears to have no visible means of support - in terms of the company's published financial data at least - it's hard to see where this optimism comes from. As numerous commentators have pointed out, the price is hard to justify on the basis of even the most optimistic of forecasts.

But the ICG share price and reality have not been fellow travellers for quite some time. Having spent much of last year trundling along at around €11, the share price edged upwards reaching around €15 in March before chief executive Éamon Rothwell launched his €18.50 per share bid.

Despite this being a pretty hefty premium on the average price over the previous six months, the market was convinced that the group was worth significantly more. There was much talk of hidden value in the company's property portfolio, but no one has really been able to come up with a reasonable explanation as to why its actually worth more than €18.50, which was a good €5 ahead of the average price during the previous six months.

Transport and infrastructure stocks are enjoying something of a purple patch, but few face quite the same threat from low-cost airlines as ICG. Equally, few are as exposed to an economy as lopsided as the Irish economy is at present.

Indeed the very protracted due diligence carried out by Moonduster before launching their bid at €22 suggests that they - or perhaps their banks - needed a bit of convincing the shares were worth that much. But in the end they put their money where their mouth was and made their bid.

In fact, the only person who seemed to remain rooted in reality over the last few months was Rothwell, who was adamant that €18.50 was a fair price for the company he built and knows inside out.

That was until last Wednesday at least, when he went into the market and spent €38.5 million buying 1.75 million shares, presumably from a number of the hedge funds that would have started building stakes once the Rothwell bid was launched.

But it might still be jumping to conclusions to presume that Rothwell really thinks the shares are worth that. Indeed, it would be nice to think the opposite, otherwise his €18.50 offer looks a little disingenuous, even allowing for the axiom that a bid to take a company private must undervalue it in order to make any sense.

It would be nicer to think Rothwell paid up in order to regain the initiative from Lynch, who seemed to be on the verge of snatching ICG from under his nose.

And he would appear to be back in the driving seat. With over 20 per cent of the company under his control, he can prevent Lynch taking outright control - and should Lynch end up owning a majority stake, he would be able to block corporate activity requiring shareholder approval. And even if Lynch were to sweeten his offer even further, one suspects Rothwell would not play ball, having already rejected overtures to stay on and work with Lynch's consortium.

Faced with this situation, one might expect Lynch to abandon his ambitions to take over the company and settle for the role of significant minority shareholder, as he has done successfully in National Toll Roads.

But against this, one has to allow for what appears to be an emotional or at least not entirely rational aspect to the Lynch camp. They have already tabled one bid that many analysts feel is hard to justify on the basis of the company's numbers alone, so you can't rule anything out.

On balance you would presume that Rothwell will keep his powder dry until he sees if Lynch will proceed with his offer now. If he does then it comes down to whether Rothwell will run the risk of letting Lynch build up a majority position, which would in time see him take control of the board. If he is not prepared to run that risk, then he must bid again.

Given the forces at play its very easy to see why hedge funds are still buying into ICG in the expectation that there will be at least one more bid before the deal is done.

But it's also worth noting that a number of others decided to take their money now and sell out to Rothwell last week at €22.