Solicitor turned property developer Mr Noel Smyth is planning to take Dunloe Ewart private in an offer to shareholders which values the property company at €182 million (£143 million).
The buyout will be funded by a £20 million cash injection from Mr Smyth, asset sales and bringing in joint venture partners for some of the group's biggest developments.
Shareholders are being offered 47 cents for every Dunloe Ewart share, made up of 37 cents in cash and 10 cents in loan notes which will be redeemed over a three-year period as the group sells off some of its assets. The 47 cents a share offer compares to the current market price of 37 cents, and is as high as the Dunloe share price has been in the past two years.
In addition, shareholders who decline to accept the offer will be given a second opportunity to sell their stake in five years' time under an as yet undecided exit mechanism. Mr Smyth said this could include a possible re-listing of the shares or valuing the company at that stage and distributing cash to shareholders in proportion to their holding.
"I'm not convinced that small cap property companies will be out of favour indefinitely. I know we're out of season now but who knows in five years' time? What we're doing is giving people who want to sell the opportunity to sell and shareholders who want to stay the opportunity to stay," Mr Smyth said.
The decision to take the company private is the culmination of a six-month review which has seen Dunloe consider various options. "It's taken us six months to get to this stage. We've had discussions with other plcs about joint ventures, being taken over or merging and we looked at the possibility of a rights issue. We've gone through a fair amount of rumination."
The option of mounting a major rights issue to fund the group's development programme was ruled out after it emerged that such a fundraising could only be done at a large discount to Dunloe's net asset value of 40.5 cents per share. "The board was not prepared to consider issuing shares at that level," said Mr Smyth, who added that the group's stockbroker, Davy, had advised that there would be limited support for a rights issue above 32 cents a share and even then a successful outcome could not be guaranteed.
The cash element of the buyout will cost Dunloe Ewart a maximum of £113 million, but informed sources believe that the final cash element will be considerably lower, given that Mr Smyth (who owns 22.5 per cent), Mr Phil Monahan (who owns 6.7 per cent) and British Land (which owns 5 per cent since it bought into Dunloe's Cherrywood development), are unlikely to sell their stakes. Indeed, Mr Smyth is providing £20 million in equity finance towards the cost of the buyout.
Mr Smyth told The Irish Times that Dunloe is talking to a number of parties about becoming joint venture partners in some of the group's properties. Dunloe is talking to British Land about the British group increasing its stake in the Cherrywood development beyond the current 50 per cent.
Mr Smyth said that British Land does not have any first option on the Dunloe stake in Cherrywood and discussions are taking place with other potential investors. He added that Dunloe is also in discussions with potential joint venture partners for the group's Sir John Rogerson Quay and airport developments in Dublin and two developments in Belfast at Royal Avenue and Lanyon Place.
When the 10 cents loan notes will be redeemed will depend on how quickly other assets are disposed. Mr Smyth declined to reveal what other assets are for sale - "we don't want to be seen as a forced seller" - but they are thought to be a mixture of residential and commercial developments which are still in the development stage.
