The mini-rumblings among board members of Belfast property company, Ewart, have the potential to explode into an unseemly public schism. The three blocks of directors, now emerging, appear to have different perceptions on the correct route for the company. On one side are the three executive directors, Mr Barry Gilligan, Mr David Robinson and Mr Richard Deeny. They are opposed to the bid by Dublin-based property company Dunloe House and are against having discussions. On the other side are Dublin solicitor, Mr Noel Smyth, who controls Dunloe and who has a 26.5 per cent stake in the Belfast company, and his associate, Mr Stewart Harrington. Both are non-executive directors of Ewart. They obviously have no role in the deliberations of the Ewart board but they want to open up a dialogue. Sandwiched in the middle are Ewart's non-executive chairman, Mr Brian O'Connor (he owns 15.9 per cent of Ewart), and Mr Harold Ennis. They agreed with the executive directors to reject the offer. They were in favour of discussions taking place but were overruled by the executive directors. Lack of dialogue can only lead to a retrenchment of views. And that cannot be good for the company. The executive directors seem to have an inherent distrust of the Dublin company. That distrust arises from an unwanted encounter five years ago when Ewart thwarted an approach by Monarch Properties, controlled by Mr Phil Monahan, who was advised by Mr Smyth. Subsequently, Mr Smyth bought his block of shares and gained a seat on the Ewart board. It may seem bizarre that the executive directors who own less than 1 per cent of Ewart's equity can have considerably more sway than the directors with substantial shareholdings. They could argued, with a lot of justification, that they represent all the shareholders and not just one or two blocks. However, the trio have the balance of power on the board. Suspicions and emotions should not be allowed to cloud an assessment regarding the merits of amalgamating the two companies. Just two questions need to be addressed. One: would an amalgamation make sense? Two: If yes, at what price?

It is quite clear that an amalgamation would make a lot of commercial sense. Ewart has no properties in the Republic, Dunloe has none in Northern Ireland. An amalgamation would give the enlarged group an all-Ireland dimension.

Ewart's property portfolio which includes its flagship, the Laganbank development, has a solid property portfolio with real growth in value. Much of Dunloe's net asset per share growth has been due to rights issues.

But Ewart has been expanding its asset base at a much slower rate than Dunloe. Indeed, the announcement of talks has not halted Dunloe's gallop, albeit with companies connected with Mr Smyth. In the past two weeks, Dunloe announced plans for the £23 million, 227,500 sq ft, project comprising a hotel, apartments, a conference centre, a multi-purpose leisure area and shopping units for Tralee. And this month it agreed terms to acquire (from Mr Smyth) a 3.85 acre site at Sir John Rogerson's Quay , Dublin. An amalgamation of the two companies would probably accelerate the developments at Ewart. Also, the two together would have a market capitalisation of around £100 million, or a minimum level to be seriously considered as an investment medium by institutional investors. This was the target figure Green Property had before it grew into a medium-sized property company.

Price is not that straight forward. The Dunloe offer consists of 18 Dunloe shares for every five Ewart shares, or a loan-note of 70p sterling, or cash of 67p sterling. Based on Ewart's historic net assets per share of about 66p sterling, and considering that property companies in the UK are usually acquired at a discount, the offer might appear fair enough. Also, institutional shareholders have not been enamoured with the company as its share price, up to recently, has been trading at a substantial discount to the asset value. However, Ewart, as part of its defence, can be expected to rush out its interim results to December 31st 1997, early in January 1998. These are likely to show a big increase in the net asset backing which could rise to the mid-70s per share. Ewart could also try to generate a counter bid. That, however, could not succeed without the approval of Mr Smyth and Mr O'Connor who control 42.4 per cent between them. Ewart could try to get an investor to buy the duo out. That would prove expensive as Mr Smyth's 8.2 million shares were purchased for £5.6 million in 1995, or 68p sterling per share (77p in Irish currency). Mr O'Connor is estimated to have bought his 4.9 million shares at prices of 64.5p sterling (73p) to 70p sterling (79.5p). They would need much more than 80p per share to justify their original investment. The initial offer by Dunloe is too low. Dunloe may well have to make a second bid, of around 80p per share. Unlike other bids, Dunloe is looking for only a minimum of 51 per cent to succeed and with Mr O'Connor likely to accept a second offer (or even the first offer) Dunloe is nearly there. In that scenario Dunloe could appoint more nominees onto the Ewart board thereby severely diluting the influence of the executive directors. But it would be more in the interests of Ewart to match their skills with the entrepreneurial flair coming from Dunloe.