Directors and senior management team stood to gain many millions if the flotation had gone ahead successfully, writes Siobhan Creaton, Finance Correspondent

It took a series of crisis meetings at C&C's Dublin headquarters last weekend for the directors of the drinks and snacks company to accept finally that they would have to abandon any hope of successfully floating its shares.

Tomorrow morning the directors and the group's senior management team stood to gain many millions if C&C had been successfully floated on the Dublin and London markets.

But in current volatile conditions, they must now rethink that strategy and concentrate on managing and developing the business without the huge financial resources a successful flotation would have delivered.

It had been hoping to raise €267 million after costs and payments to existing shareholders and aimed to use this money to pay down some of its considerable debt burden, which is approaching €800 million.

Chairman Mr Tony O'Brien says the board will be considering its future in the coming days and has indicated that a stock market flotation will remain its preferred option. It just has to wait for the right market conditions. He admits the company is very disappointed, but is keen to emphasise that the firm is not under pressure to come to the market for funds and that it will not have any adverse effect on its day-to-day business and short-term growth prospects.

Despite putting a brave face on it, there is little doubt that the cancellation of this flotation is a set-back for the drinks and snacks company.

The paying-down of a large chunk of the debt on its balance sheet would have yielded sizeable savings in terms of the interest it would have to pay to service those loans.

It will have to factor in these costs over a longer term, something which will have an impact on its profitability going forward. Mr O'Brien points out that the company had already restructured its debts and had managed to renegotiate more favourable terms.

It has also repaid a loan of around €300 million to BC Partners and insists its relationship with the venture capitalist remains good.

Mr Liam Igoe, analyst at Goodbody Stockbrokers, suggests that the abandonment of the flotation will now leave C&C's balance sheet fairly stretched.

"It is still a highly cash-generative business but it does have very expensive debt to service."

The timing of the flotation could not have been worse.

It had already been forced to reduce the expected offer price by about 30 per cent to reflect weaker stock market conditions. This brought the price range to between €2.60 and €3.60.

Almost immediately, fund managers were indicating they would only buy the shares for less than €3 each.

And last week the price they were prepared to pay was reduced further.

Many institutions had told the company they would only buy the shares for €2.60 or less.

It is likely that those institutions would have reviewed whatever tentative offers they had made to subscribe for the shares yesterday in light of further stock market weakness and the low level of interest expressed by small shareholders in the stock.

The company would have been very disappointed to have offered the shares below the €2.60 level.

It would also have been fearful that the shares could have slumped in value on the first day of trading, immediately upsetting investors and lowering the market value of the company.

The company had attracted much positive comments from analysts and stockbrokers as a good investment at the right price.

The company had a strong track record, was built on leading brands and its business was easily understandable to investors.

On the downside though, the company does have large debts, is almost totally reliant on the Irish economy and, in particular, on one brand, Bulmers Cider, which accounts for 70 per cent of the group's profits.

It was being marketed to international investors as a defensive stock with strong earnings potential.

Investors would have been mindful of its exposure to a slowing Irish economy but are more likely to have shied away from the stock, preferring to transfer their clients' funds out of equities and into safer havens such as cash and government bonds.

The large investment institutions would have been expected to have taken up to 70 per cent of the shares being offered.

If they were not interested, the flotation never had a chance.