Jane O'Sullivan,

Markets Correspondent

Ardagh Glass, the Guernsey-based private company spun out of the publicly-quoted Ardagh Plc two years ago, is to offer its small shareholders €4.00 per share to buy out their stake.

The offer to shareholders, which could cost up to €53.4 million, will be funded from the proceeds of a €125 million 10-year loan note which Ardagh is planning to sell in the coming days.

The shareholders, who opted to retain shares in the private company rather than accept a cash alternative of €1.10 two years ago, will again be given an option to retain an interest in the private glass company this time around.

They will be given the choice of holding onto 10 per cent of their existing shareholding, which will be converted into shares in a newly-created holding company, Caona, while realising cash for the balance.

If all shareholders were to elect to retain an interest in the company, they would end up with 15 per cent of Caona which will have an initial share capital of €20 million.

Yeoman, the venture capital company, which is the largest shareholder in Ardagh Glass with a 41 per cent stake, would end up with a 45 per cent stake in Caona while chairman Mr Paul Coulson would hold 25 per cent and Ardagh management a further 15 per cent.

If some or all shareholders do not choose to retain a shareholding in Caona, it will be subscribed for by Yeoman "or other persons designated by it", the company said.

A cash injection of at least €80 million is also planned from the proceeds of the loan note to further finance the development of the glass business. This is earmarked for acquisitions or an extension of the business.

While there are no definite plans, Ardagh Glass is looking at the possibilities arising from the consolidation taking place in the British and European glass market, sources close to the business said.

Ardagh Glass already has approval from more than 70 per cent of shareholders for its plan although it must get the go-ahead from a further 5 per cent if the special resolution is to be passed at an extraordinary meeting.

Meanwhile, the company is expected to issue the €125 million senior pay-in-kind note on Wednesday. The note, which is due in 2015, will pay a coupon of between 10.75 and 11 per cent and has been partly pre-allocated to investors.

At the time of the spin-off of Ardagh Glass in 2003, shareholders were promised the company would provide liquidity by offering to buy back 5 per cent of the shares each year for three years. The offer to buy back all of the shares comes just two years after the deal was agreed, despite a rival offer from the Quinn Group.

As part of the de-merger, shareholders also retained an interest in the publicly-quoted company, Ardagh, which was subsequently renamed South Wharf and remains listed on the Irish stock market.