What is happening with the bid for the ferry group, asks Ciarán Hancock, Business Affairs Correspondent

A LITTLE after 5.30pm on Wednesday evening, the Philip Lynch-led Moonduster consortium held a conference call with Irish Continental Group (ICG) chairman John McGuckian and asked him to defer the following day's extraordinary general meeting (egm) of shareholders.

Moonduster asked for six weeks' grace to consult with the other large stakeholders in the business and potentially put together another offer for the ferry company to break an 18-month logjam.

This effectively scuttled the board's plans to seek approval at the egm in the Clarion Hotel in Dublin's docklands to give it the authority to buy back ICG shares, and allot redeemable shares.

It was the latest twist in a takeover saga that has involved leading property developer Liam Carroll and ICG managing director Eamonn Rothwell. The timing of this approach is peculiar. Moonduster is under a moratorium from the Irish Takeover Panel from bidding for ICG. That moratorium expires on October 31st.

The Takeover Panel is also investigating claims that Moonduster - which comprises Lynch's One51 investment group and the Cork-based Doyle shipping company - and the British investment fund Arkaga could have worked together in buying shares in ICG last year when it was in the midst of its takeover battle.

Arkaga ended up controlling 5.17 per cent of ICG while Moonduster owned 25 per cent of the company. This would have put them over the 30 per cent limit that triggers an obligation to make a bid for the entire group.

No such relationship was ever disclosed to the stock market. If proven, it would have made Moonduster and Arkaga concert parties and put them in breach of rule nine of the takeover code.

To complicate matters, Arkaga is believed to be seeking €11.8 million in compensation from Moonduster for losses incurred in selling half of its stake in ICG earlier this year. Arkaga claims to have acted as an agent for Moonduster in buying the ICG stock.

The Takeover Panel's enquiry followed receipt of a letter by Kevin Beary, managing director of Dolmen Corporate Finance, who claims he was told by former Arkaga director David Hayes of a relationship between Arkaga, Moonduster and construction group Laing O'Rourke to develop ICG's 33 acres in Dublin Port.

It has since emerged that Laing O'Rourke acquired half of Arkaga's ICG holding this year.

A spokesman for Moonduster declined to comment on the timing of its approach. He said the claims made in relation to Arkaga were "spurious" and that Moonduster was in the process of providing "a comprehensive response" to the Takeover Panel to the allegations. This is expected to be lodged next Wednesday.

For small shareholders in ICG, this series of events must be somewhat bewildering. On Thursday, at the egm, a representative of Moonduster requested an adjournment of the meeting for six weeks. This motion was defeated by the investors present.

The Moonduster representative then stated the consortium was opposed to the share buyback programme as it believed the company should preserve its cash balances given the current global financial turmoil. Moonduster duly voted against the resolution and the plan to allot redeemable shares.

It is understood Moonduster's decision to oppose the share buyback programme was made known to the ICG board on Monday, and was reinforced in a letter sent to the company on Thursday morning.

In its statement to the stock market yesterday, ICG indicated it had sought the approval of the company's large shareholders before calling an egm.

"The board received adequate comfort from those major shareholders to be satisfied that there would be sufficient support for the resolutions and that it was appropriate for the egm to be convened," the company said.

The board had argued the share buyback would have allowed small investors the opportunity to sell their stock at a time when the shares have been highly illiquid, without disadvantaging any of the large shareholders.

It also argues the ferry company is well-resourced. ICG throws off a lot of free cash and its net debt was €55 million at the end of June, considerably less than the €70 million it is expected to post in earnings before interest, tax, depreciation and amortisation this year.

It remains to be seen if Moonduster can persuade either Mr Carroll, who owns 29.25 per cent of ICG, or Mr Rothwell, who controls 16 per cent, to sell their holdings. An offer per share well north of €20 will probably be required - its shares currently trade at about €16. Sources close to Moonduster say funding would not be a problem.

Speculation has mounted that Mr Carroll would be a willing seller, given the decline in the property market. He sold out of Aer Lingus earlier this year, at a huge loss in what was interpreted as a need for cash.

Mr Rothwell's Aella consortium, which bid €24-a-share for ICG last year, appears to have been deactivated and he is participating in board discussions on the Moonduster approach. It's not hard to believe he could be a willing seller.

The deliberations of the Takeover Panel could ultimately prove crucial. ICG is believed to want a full hearing into the allegations of improper share dealing in the ferry group by Moonduster and Arkaga.

Moonduster was censured last year by the Takeover Panel for breaching rules when it bought ICG stock off a fund called Octavian. A second breach would be damaging for Moonduster and Mr Lynch's hard-earned reputation. It might also force Moonduster to make a bid for the entire company at €25.40.

Given what's gone before, this is a saga that could run and run.