Two weeks ago Dunloe Ewart was one of the Irish Stock Exchange's many wallflowers: a plain and uninteresting property company whose largest shareholder had decided to take it private in the face of growing apathy from big investors. Today Dunloe Ewart is being fought over by some of the biggest names in Irish property and courted by an English company with colourful connections.
What is at stake is a company with a stock-market value of €182 million (£143 million) which almost exactly matches its debts. But that is not what interests the property men. The document sent to shareholders recently outlining the now cancelled privatisation scheme lists 28 properties in Northern Ireland and the UK valued at €150 million and another 10 development sites in Belfast valued at €126 million. In addition the company's 27 investment and development properties in the Republic are valued at €358 million. The jewels in Dunloe Ewart's crown are its development lands, which include a 1.34 hectare site at St John Rogerson's Quay and 0.71 hectares at Barrow Street, both in the Dublin docklands. The company is also involved in a massive development outside Dublin at Loughlinstown called Cherrywood with British Land. In Belfast it has sites at Lanyon Place and Royal Avenue.
The failure of the share price to reflect anything like the value of the company's assets was what eventually drove Mr Smyth to propose taking the company private earlier this year after a strategic review. Mr Smyth originally wanted to raise money from the shareholders to develop some of the properties but was told by his advisers that he would only get people to invest if he offered shares at a considerable discount to the already low share price.
Instead Mr Smyth offered to buy out any shareholders who wanted to sell at 47 cents a share, later upped to 51 cents. Some of the money - 17 cents - would be in the form of unsecured loan notes. Those shareholders that wanted to remain in the company could do so, but Dunloe would give up its public listing with the rights and advantages that it conferred on small shareholders.
In total the deal would have cost Mr Smyth just more than €100 million of which €76 million was to come from British Land which would have taken stakes in a number of Dunloe developments. Other properties would have to be sold after going private, as Dunloe Ewart needs to spend more than £150 million over the next five years, according to Mr Smyth. The attraction to the Dublin solicitor - who was putting up €25.4 million of his own money - of taking Dunloe Ewart private was the freedom it gave him to manoeuvre "You don't own a public company. You are a participant in one," he explained this week. There was also little doubt that at 51 cents a share, he was getting good value.
Taking the company off the stock market needed the approval of the High Court and also of shareholders. The final act in the process was to have been a shareholder meeting on Wednesday after which Dunloe Ewart would quickly cease to be a public company. Up until late last month it looked as though the meeting would be a mere formality but then Mr Liam Carroll appeared on the Dunloe Ewart share register.
The reclusive Dublin builder started buying Dunloe Ewart shares in the market and very quickly assembled a 14.97 per cent stake. It was assumed that Mr Carroll had his eyes on some of Dunloe Ewart's prime sites in the Dublin docks - the Sir John Rogerson's Quay site in particular - and wanted to block the privatisation with a view to forcing Mr Smyth to do a deal with him.
But when Mr Smyth called Mr Carroll's bluff this week, the builder's response implied that he had another agenda. On Monday Mr Smyth announced that the company was going to abandon the privatisation plan as a result of both Mr Carroll's stake building and an approach from another property company, Orb Estates. Mr Carroll responded by going to the High Court to try, unsuccessfully as it transpired, to force the company to go ahead with the meeting. Quite what Mr Carroll would have done at the meeting was unclear, but it has been suggested that he planned to combine with Mr Phil Monahan, another developer and shareholder, to defeat Mr Smyth. But then what?
Orb Estates emerged as a bidder more than two weeks ago but Dunloe Ewart kept the lid on its approach for a week by claiming that under stock exchange rules it did not have to deal with Orb as the British group could not prove it had the finances to mount a bid. Orb Estates, which is backed by Lynch Talbot, a Channel Island-based venture capital group, had to go to the Irish Takeover Panel to force Dunloe Ewart to treat with it.
Mr Smyth now plans to have talks with both Orb Estates and Mr Carroll. He has offered the Dublin builder a seat on the board, but is safe in the knowledge that he is unlikely to accept. Notwithstanding his abhorrence of a public profile the developer will be deterred by the stipulation that board members must offer any major property developments to the company before they can undertake them privately.
Orb Estates is seeking a number of preconditions before making a bid, the most significant being that the board supports the bid. Mr Smyth and the other directors are loath to do so as Orb Estates is understood to be only interested in the UK property portfolio. The Irish properties, many of which are subject to joint venture agreements, would be sold off which would present both personal and professional problems for Mr Smyth and his management team. Even in the dog-eat-dog world of property development, personal relationships with other developers are important and agreements have to be honoured, according to Mr Smyth.
It seems more likely that Mr Smyth will come to some arrangement with Mr Carroll and Mr Monahan. Surprisingly Mr Smyth has never met Mr Carroll - further evidence of the builder's reclusive nature some would say - but the two men are experienced deal makers.
For the rest of Dunloe Ewart's shareholders there is little to be done other than to sit on the sidelines and watch. The good news is that whatever happens the upshot is likely to be a better deal than the 51 cents in cash and loans that Mr Smyth was offering.
