Some shareholders are angry at the manner in which the company has handled recent developments

Glassmaker Ardagh last night rejected an offer for its international glass manufacturing operations from the rival Sean Quinn Group.

The Quinn Group had offered €51.9 million, or €1.50 per share, for those parts of the company that Ardagh is planning to demerge and place in a private company based in Guernsey.

The offer compares with a €1.10 per share cash alternative being offered by Ardagh to those shareholders who do not want to take up their shares in the new operation.

In a statement to the Irish Stock Exchange, the company said it did not believe now was the right time to dispose of the company and that the glass business was not for sale. It added that the offer undervalued the assets Quinn sought to purchase.

HgCapital, the largest shareholder in Ardagh, has given an irrevocable undertaking to back the deal and take the €1.10 cash offer, which will cost the company €11.7 million.

Hg and Yeoman International, the private vehicle of Ardagh chairman Mr Paul Coulson, have also agreed that neither can sell their shares without the the consent of the other until the end of March 2006, a move that effectively blocks a hostile challenge to the company.

A spokesman for the Quinn Group, which has accumulated a 2 per cent stake in Ardagh in recent months, last night said shareholders should vote against the company's demerger plan at an extraordinary general meeting next Wednesday and put the company into play.

Ardagh insists that defeat of the demerger plan would mean there was no separate entity to be targeted by Quinn Group or other parties.

If the demerger succeeds, Yeoman will have a 34 per cent stake in the private entity.

The demerger plan, together with the management of the announcement by Yeoman/ Ardagh of the purchase of German glassmaker Hermann Heye for around €35.5 million and the summary rejection of the Quinn bid has angered some shareholders and caused confusion in Dublin financial circles. Sources suggested that the only reason the company had not come under even more pressure was that major institutional investors had little or no stake in the company.

One senior institutional analyst described the behaviour of the company as a disgrace and asked what the Irish Stock Exchange and the Irish Takeover Panel were doing to protect small shareholders.

One shareholder, speaking to The Irish Times, said he was considering court action over the oppression of the rights of minority shareholders arising out of the conduct of the board and the major shareholders. "It strikes me that this is a case of one group of shareholders benefiting at the expense of others," he said. "We are being asked to give up our rights as shareholders in a public company to go into an arrangement where we have fewer rights and no exit mechanism."

Mr Coulson defended the move saying he had been approached by shareholders looking to be part of any initiative by Yeoman and others. "We are offering people a chance to join with us in realising gains in the future," he said.

"We have a strong position with Rockware in Britain and footholds in Italy and Germany, once the option to acquire Hermann Heye is exercised post-demerger. We will have strong cash-flow and access to private equity, which will allow us to be acquisitive.

The Quinn group dismissed these assurances.

"Shares in any demerged group may be worth the €5 or €6 Ardagh claim in time to come but the company's largest shareholder is getting out now.

"Shareholders considering their options should compare the performance of Ardagh's management team, which has led the company's shares to a performance far inferior to that of the Irish exchange over recent years, to that of the Quinn Group."

Ardagh requires the approval of 75 per cent of the shares to proceed with the demerger plan. Between HgCapital, Yeoman and the shares of board members and executives committed to the plan, it has about 60 per cent support before looking to other shareholders.