INDUSTRIAL holding group, DCC, now seems certain to acquire the minority shareholdings in LPG distributor Flogas, but will end up paying an additional £2.5 million. This brings the total net cost of acquiring the 40 per cent minorities to £28.5 million.
As was signalled in The Irish Times last week, Flogas is to pay its minority shareholders a second interim dividend of 25p per share, a move that will reduce Flogas's net cash by £2.5 million to about £10 million. This brings the net additional cost to DCC of buying out the minority shareholders to £2.5 million.
All of Flogas's minority shareholders who were on the share register before DCC announced its intended 275p per share offer will receive the special dividend, including those investors who sold Flogas shares in the market when DCC increased its stake in Flogas from 60 per cent to 78.1 per cent.
At the half year stage, Flogas paid its shareholders a net dividend of 3.93p per share and the second dividend of 25p brings the total dividend for the year to the end of March to 28.93p, compared to the 10.6p combined net dividend forecast by Flogas's brokers, Davys.
Sources close to the Flogas independent directors - Mr Joe Moran, Mr Brian Davy, Mr Eugene Quigley and Mr Dermot Moore - have indicated that the independent directors had decided to reject DCC's 275p per share offer for the minority shares, even before two institutional shareholders, Scottish Provident and Friends Provident, publicly rejected the offer.
"275p was never going to wash," said one source close to the independent directors.
Detailed negotiations between the Flogas independent directors, DCC, and their various advisers followed in an effort to get over the impassse presented by the independent director's unwillingness to recommend DCC's offer and DLL's public statement that the offer would not be increased under any circumstances.
What eventually emerged was the second interim dividend, although one source close to the negotiations said: "There was a Mexican standoff for a couple of days and it was a bit of a struggle to get that 25p."
The special dividend of 25p also had to get the approval of the Takeover Panel because the payment of the dividend represented a material change to the original DCC offer. It is understood that the panel agreed to the payment of the special dividend on the basis that all the minority shareholders on the register - before DCC's proposed offer was announced - 40 per cent of the total would benefit.
This means that institutions such as Flogas's biggest shareholder, AIB Investment Managers, who sold their shares to DCC in the market will benefit from the special dividend.
Yesterday Scottish Provident fund manager, Mr John Lawrie, said he would "reluctantly" acccpt the revised offer. "This is the least I would have contemplated accepting. It's simply the equivalent of 300p per share rather than 275p."
Friends Provident fund manager, Mr Pramit Ghose, also said he would accept the revised offer and said that it was the equivalent of 306p per share when the tax credit was taken into account.
DCC chief executive, Mr Jim Flavin, said: "This may have cost us an extra £2.5 million but it's a small price to pay for a key strategic objective."
The 275p per share offer plus 25p special dividend means that some of the independent directors will receive substantial sums for their shares in Flogas. Mr Joe Moran will receive £1.75 million while the former chief executive of Floras, Mr Eugene Quigley, will receive £657,000.
All four independent directors have given commitments to accept the revised offer in respect of their combined 3.4 per cent shareholding in the company.
