The long-suffering shareholders of James Crean will decide, on Wednesday, to unhinge the print and packaging division from the group, and float it off as a separately quoted company. This raises two important questions that need to be addressed. First: who are the two mystery shareholders who control 40 per cent of Crean and appear to be in breach of company law? Second: will shareholders merely end up with two Creans?
The group's last annual report discloses that four shareholders - IBI Nominees, Tweedy Browne Company, Scottish Provident (Irish Holdings), and Mr Ray McLoughlin - control 10.5 million shares, representing 23.3 per cent of the company. It also declares that no other party has told the company of a direct, or indirect, holding of 3 per cent or more.
That seems fair enough, but a table in the last page of the annual report informs shareholders that six shareholders own 28.6 million shares, or 63.3 per cent of the total. That means that two unidentified shareholders own 18.1 million shares, representing 40 per cent of the company.
Sections 67 and 70 of the Companies Act, 1990, make it clear that shareholders are obliged to inform the company of a 5 per cent holding. If they make such a disclosure, the company is obliged to identify them. However, if they do not then they are in breach of the Companies Act. What is incredible is that the Crean board has not flushed out the identity of the mystery shareholders. Under sections 79 and 81 of the Companies Act, 1990, a company can require the unidentified shareholders to reveal their identity and if they fail to do so, they can be disfranchised. That means such shareholders would lose all their rights, including the right to take legal action against the company.
So why has the Crean board not pursued this line of action? (No one from Crean has been available for comment). Surely the outside shareholders, and the investing public at large, should be told who owns 40 per cent of their company. The position is unacceptable for two reasons. First, if the board members know the identity of the shareholders, why have they not passed this sensitive information on to their shareholders? Second, if they don't know, why are they willing to serve on the board of a company where the identities of the two largest shareholders are unknown?
The identity of these shareholders is all the more relevant as they will also be shareholders of the print and packaging division, about to be floated, raising the prospect of creating a clone of Crean. While Mr McLoughlin has assured Crean shareholders the two companies will be totally separate, and there will be "no conflicts of interest", the companies will still have strong links.
The six shareholders will control 63 per cent of Crean which will be left with the food division (this may have increased following Mr McLoughlin's recent share purchases), and the six plus Crean (it will have 20 per cent) will control 76 per cent of Oakhill which will own the print and packaging division. Crean will have three of the seven directors (one of whom has transferred from Crean). While each company will have a separate location, it should be asked if any of the Crean employees will have a dual role in Oakhill?
But what about the prospects for Oakhill? It is effectively the old Inishtech company in which Crean had a 70 per cent stake, and was valued by Crean in 1996 at £90 million. It was effectively privatised and is now being relisted minus some of its better companies, and will probably be valued at under half 1996's worth.
The performance of print and packaging under the full control of Crean has been pedestrian with operating profits rising from £8.7 million in 1996 to £9.6 million in 1998. And the performance of Speedprint acquired last year for £6 million sterling appears grim. The Oakhill prospectus reveals that Speedprint generated a profit of £272,000 in the eight months to December 1998; annualised, this is effectively half the previous year's figure - yet this has not been eluded to.
That is now history and shareholders will be looking to what the new chief executive, Mr Donnacha Hurley, former chief executive of TEAM Aer Lingus, will do. His financial package is attractive; a salary of £175,000 to be increased to £200,000 next January if eps growth is more than 5 per cent, plus an incentive scheme of up to 75 per cent of salary if eps growth is 25 per cent above the highest eps in previous years. And he will have options over 1 million OakHill shares.
Starting with a gearing of some 89 per cent, his room for manoeuvre will be limited making it essential to line up with a "strategic investor", as planned. And while the issue of new shares to Crean will reduce the percentage held by the two mystery shareholders, combined they will be the largest with a 32 per cent interest. If they were acting in concert, that percentage would require them to make a bid for the company, all the more reason for Crean to make a statement about these holdings.
