Listed investor Boundary Capital and Anglo Irish Bank are set to buy a stake in retailer Arnotts from the Nesbitt family in a €65 million deal.
The news comes two weeks after a feud between the Nesbitts and the O'Connors was resolved when its chairman, Richard Nesbitt, agreed to buy the O'Connors' 24.57 per cent stake in the company for over €40 million.
Boundary, the brainchild of property player and financier Niall McFadden, said yesterday that it and Anglo Irish will buy 45 per cent of Art Holdings Ltd, a holding company that will acquire 100 per cent of Arnotts, for €65 million.
The pair will do the deal through a a vehicle called Brunner Ltd. Boundary will pay €40 million, which will result in it owning 28 per cent of Arnotts indirectly, while the bank will pay €25 million for the remaining 17 per cent.
Mr Nesbitt and other members of his family, will have the remaining 55 per cent. He owns 29 per cent directly and also 60 per cent of Art Investments, which in turn holds 60 per cent of Arnotts Holdings.
All this will be transferred to Art Holdings, a new company with no connection to Art Investments, once the deal goes through, which is scheduled to happen in six weeks time.
However, none of the parties said yesterday how much, if any, of the Nesbitts' 55 per cent would be owned directly by the chairman. Neither did they say how, or if, the proceeds of the sale would be distributed between the family's members.
Boundary said yesterday that €11 million of its €40 million will come from its own resources while it will borrow the remaining €29 million. Boundary was advised by Maples and Calder. Davy advised Arnotts.
Arnotts consists of three stores in Dublin - its flagship on Henry Street, another in Stillorgan and Boyer's on North Earl Street- and a considerable land property bank in the north inner city.
The group is poised to develop this as a 1.65 million square foot mixed development known as the Northern Quarter.The total bill for this is set to come to €750 million. Northern Quarter will be a separate entity to Arnotts, which will own 80 per cent of it. Its development partner, British property specialist Centros Miller, will get 20 per cent of the project.
There has been speculation for some time that Arnotts had selected Centros Miller and Boundary confirmed this yesterday. Northern Quarter is bounded by Henry Street, O'Connell Street and Abbey Street. Arnotts has initial planning permission from Dublin City Council and work is expected to begin next year.
Yesterday Boundary said Northern Quarter will begin trading in 2012. Mr McFadden, who is Boundary's executive chairman, said yesterday that Henry Street is the third busiest shopping thoroughfare in Europe. Mr Nesbitt said it has the highest rate of "conversion" from passersby to shoppers in Europe.
The deal announced is the third major shift in Arnotts' ownership in four years. In 2003, Mr Nesbitt, who was advised by McFadden and Boundary, led a buyout of the group which converted it from a publicly-quoted company to a private firm.
Two weeks ago he bought out the O'Connors, who had themselves offered to buy the entire group for €200 million last May.
Mr Nesbitt dismissed this offer and instead offered them €25 million for their stake. They ultimately sold their shares to him for over €40 million, closer to their valuation than to his. The price paid to them is about 12 per cent more than the one that will be paid by Boundary and Anglo for their 45 per cent stake.
Boundary Capital: its record
One of Arnotts' newest shareholders, Boundary Capital, is a listed equity investor that is 44.6 per cent owned by its founder, Niall McFadden.
The company floated in May on Dublin's IEX market but has been active for over three years. In 2004, Boundary Capital Limited acquired Irish Estates, a property management company, and subsequently introduced the company to London and Dublin's alternative markets for new and developing businesses.
In the past, BCL has sourced, executed and managed deals on behalf of its investor base.
Since flotation, a new company, Boundary Management Ltd (BML), will bring these deals to the listed Boundary Capital and to other investors. The plc and BML have a management services agreement.
Boundary has worked closely with Arnotts and Mr McFadden is on the Arnotts board.
Barry O'Halloran
