The planned £135 million bid by Tony O'Reilly and his brother-in-law Peter Gouldandris to take Fitzwilton private is likely to be snapped up by Fitzwilton shareholders, some of the bigger shareholders have told The Irish Times.
Fitzwilton announced yesterday that it had received an approach from a consortium led by the O'Reilly and Gouldandris families which may lead to a bid to buy out the other shareholders at 50p per share.
Between them, the O'Reilly and Gouldandris families have 27.6 per cent interest, but informed sources said that Dr O'Reilly and Mr Goulandris would not have made the approach unless they were certain of having sufficient acceptances to go over 50 per cent.
Apart from their 27.6 per cent combined stake, the O'Reilly/ Goulandris bid is likely to get the support of wealthy investors (and associates of Tony O'Reilly) like Mr Stephen Subotnick who holds 4.3 per cent, Canadian property developer Mr Paul Desmarais who holds 3.3 per cent and Chiquita chairman Mr Carl Lindner who is understood to have a stake of just under 3 per cent of Fitzwilton. Those stakes alone would bring the O'Reilly/ Goulandris shareholding to close on 40 per cent.
Apart from the families, and the close associates such as Mr Subotnick, Mr Desmarais and Mr Lindner, the biggest shareholders in Fitzwilton are UBS Phillips & Drew which has just under 14 per cent, Bank of Ireland Asset Management with 10 per cent and Ulster Bank Investment Managers with 3.3 per cent.
Dunnes Stores also has 10 per cent of Fitzwilton - bought in 1995 for no immediately apparent reason - but a spokesman for Dunnes was unable to say what the retail group's attitude would be towards the proposed offer from the O'Reilly/Goulandris families. Sources believe, however, that Dunnes is likely to accept 50p per share, even though it is barely breaking even and is probably showing a loss - after carrying costs - on the 10 per cent of Fitzwilton it bought for 453/4 p a share three years ago.
Informed sources described the proposed 50p a share offer as "reasonably generous" given the recent performance of the share price and the negative attitude of many institutional investors towards the stock. Fitzwilton hit a five-year low of 32p last week when one overseas investor is understood to have unloaded a line of "several million shares," according to one market source. The shares subsequently recovered to close on 361/2p last Friday night.
The 50p a share offer represents a 37 per cent premium on that Friday closing price, although the £135 million valuation is not a lot more than the value of Fitzwilton's 16.5 per cent stake in Waterford Wedgwood - £119 million - and apparently ascribes little value to the 50 per cent stake in the Wellworth joint venture with Safeway and the Rennicks road sign manufacturing operation in Dublin.
Some sources suggested that Dr O'Reilly had finally become dissatisfied at the stock market's treatment of Fitzwilton. "He puts a higher value on Fitzwilton than anybody else and seems to think he is getting value by taking it private," said one source. The negative attitude of the market reached a peak last month, when NCB produced a damning note on the company, accusing it of lacking strategic vision and failing to enhance shareholder value, and bluntly telling investors to sell the shares. NCB, however, put a "sum-of-the-parts valuation of 54p a share on Fitzwilton - 4p higher than then proposed offer price from the O'Reilly-Goulandris grouping, although the offer is a premium to the estimated 48p a share end-1997 net asset value.
"This offer, when it comes, will be accepted very easily, and it will tidy up the Fitzwilton situation once and for all. Quite frankly, Fitzwilton has been a disaster and I don't think there is the slightest prospect of getting 50p a share, short of a bid," said one informed market source.
"Industrial holding companies and investment trusts are long out of favour and the only attractive bit of Fitzwilton is the stake in Waterford Wedgwood. Even then why should anybody invest in Waterford through Fitzwilton when they can do it directly."
Fitzwilton has 16.5 per cent stake in Waterford Wedgwood while the O'Reilly and Goulandris families have 7.4 per cent between them.
"The Safeway joint venture looked a good idea a couple of years ago, but it's looking a lot more uncertain now after Tesco buying Quinnsworth and Sainsbury moving into the north. We still haven't seen a single announcement about a Safeway store in the Republic and that says a lot," the market source added. Fitzwilton's independent directors have appointed Deutsche Morgan Grenfell to advise them on the O'Reilly/Goulandris bid when it arrives. It will be a major surprise if DMG do anything other than advise the independent directors to say "yes"
