Ferry group's biggest asset could be 33 acres it occupies in Dublin port, writes Ciarán Hancock

After years of speculation and a couple of sleepless nights this week, Eamonn Rothwell has finally made his move on Irish Continental Group (ICG). The only surprise was that the ferry group's chief executive left it this long.

At one point last September, the stock was trading at €10.50 in the aftermath of a long and bitter dispute with Siptu over the outsourcing of jobs at Irish Ferries.

His consortium yesterday offered €18.50 a share, a 73.3 per cent premium to its closing price in Dublin of September 19th last.

At a hastily-convened press briefing in Dublin's Conrad Hotel yesterday, Rothwell said he wanted shareholders to get a fair price for their stock.

The benefits of the controversial €29.1 million redundancy programme of 2005 were only beginning to flow through last year and he wanted the share price to get a kick from that.

The restructuring was designed to yield annual savings of just more than €11 million. "I know a lot of private clients and institutional investors [ in ICG] and I was never comfortable with a situation of availing of weak [ stock] markets to buy these shares," Rothwell said.

"It's about being fair. People might think that's bulls**t, but that's just me."

The "people" he might be referring to are the 500-plus Irish crew who left the company as part of the redundancy programme after Rothwell decided to replace them with cheaper labour from eastern Europe on its routes from here to Britain.

That decision created a storm with Siptu, which threatened to pull the plug on talks on a new national agreement - Towards 2016. Rothwell stuck to his guns and a deal was eventually hammered out. He says that he has an "absolutely clear conscience" about the dispute.

"I could have sat back and let the company become cost uncompetitive and not been in a position in five years' time where I'd be able to offer a voluntary redundancy package to staff."

Staff, he said, were offered a generous eight weeks' pay per year of service.

Rothwell said there were now a few key reasons why ICG could no longer remain as a public company.

Its Irish Ferries business is under enormous pressure, and not just from rival Stena Line. Fuel costs have risen from €20 million in 2004 to €33 million last year, while low-cost airlines have eaten into passenger numbers, which have declined by 19 per cent over the past three years.

Rothwell said he has also been unable to identify suitable acquisitions in the ferry sector, while diversifying into a different area of business was not feasible.

Ironically, Rothwell once looked at buying Aer Lingus in the aftermath of September 11th. "Most of the shareholders were negative about that," he reflected.

These factors led him to the conclusion that a management buyout (MBO) was the best option. The MBO, which includes Garry O'Dea, Tony Kelly, John Reilly and Tom Corcoran, made their approach on February 8th, one month in advance of the stock exchange notification.

Quite how Rothwell will achieve top-line growth as a private company remains to be seen. Freight volumes remain strong, but there is no evidence to suggest that the decline of recent years in passenger numbers can be reversed.

He will also have to service a €499 million debt with AIB, which is thought to carry an interest rate of about 5.5 per cent annually. That suggests interest repayments annually of about €27 million. ICG also had net debts of €113 million at the end of last year.

With the restructuring now completed and capital expenditure on ships largely done, both Davy and Bloxham estimate that the company will achieve free cashflow of €40 million or more from 2008 onwards. This leaves ICG well-placed to meet its debt requirements.

Longer term, the icing on the cake for Rothwell and his colleagues might be a 33-acre site in Dublin Port, which it occupies under a 150-year lease with the port company.

Dublin Port is becoming increasingly capacity constrained and the Progressive Democrats have floated the idea of moving it up the road to Balbriggan. The port would then be redeveloped for residential, leisure and commercial purposes.

The Government has said it will carry out a "comprehensive study" of the proposal.

Paul Coulson's South Wharf and the Dublin Port Company recently netted €16.5 million an acre from the sale of the Irish Glass factory in Ringsend. This would suggest a valuation of €545 million for ICG's land, although the Dublin Port Company, as landlord, would be entitled to a slice of the action.

Those close to Rothwell say this is not a property play. Then again, Paul Coulson's associates used to say the same about his involvement with Irish Glass.

ICG Key Dates

1973Formed as joint venture between Irish Shipping, Fearnley & Eger and Swedish company Lion Ferry. Begins operating Rosslare to Le Havre

1988IPO of shares on stock market

1992Eamonn Rothwell appointed managing director

1993Buys state-owned B&I for €10.8 million

2001Launches Ulysses, world's largest car ferry on Dublin-Holyhead

2005Outsources 500-plus Irish jobs to eastern Europe

2007€471 million MBO led by Rothwell announced