UNILEVER'S bid to acquire the minority share holdings in Lyons Irish Holdings received a major setback yesterday when the Lyons board urged rejection of its offer.
The unconditional offer of 323p per share is inadequate and does not represent a fair and reasonable offer for the remaining 25 per cent of the ordinary share capital not already owned by Unilever, the Lyons board said.
The board said it would be recommending to shareholders that they reject the Unilever offer and will be writing to shareholders this week, setting out its reasons.
Unilever hit back last night, saying it believes that the price takes full account of the value of Lyons. "The price per share of" 323p agreed with Allied Domecq for its majority share holding followed a lengthy auction process from which Unilever emerged as the successful bidder," it said. A spokesman for Unilever would not elaborate any further.
Market sources said the move by the Lyons board is very probably a tactic to force Unilever to increase its offer. It is understood, that Lyons shareholders currently have around, 7.5 million shares.
"It seems to me that this is a negotiating ploy to raise the share price offer," said one source. "They (the board) know that Allied Domecq signed off on the deal. The board probably feels it has a responsibility to the minority shareholders now."
Mr John Condon of KPMG Corporate Finance, who is advising Lyons, said the board was not "recommending a price at which shareholders should accept an offer.
Various prices have been talked about in the market including a price of over 400p. This valuation came from Tilman Asset Management, who manage private client funds. It wrote to the Lyons Board expressing its disapproval of the Unilever offer. Goodbody Stockbrokers also wrote to clients urging them to reject the Unilever offer.
Tilman said last week that Allied Domecq was a distressed seller and Lyons was sold at a price which seriously undervalues the company.
However opinion is divided. One source said the bidding for Lyons was not a hotly contested auction", but the price was a very fair one.
"Unilever came up with the best, price by far, on the day, said the source.
Unilever also had to withdraw its Liptons Tea brand from the Irish market because of fears by the Competition Authority that it would be too dominant in the marketplace.
. The Lyons board comprises Mr Pierce Butler who is chairman chief executive, Mr Paddy Duggan, and executive director, non executive directors Mr Martin Rafferty, Mr Eoin Ryan and Mr Tony Pratt, of Allied Domecq and Mr Tony O'Brien, of C&C.
Lyons has a "couple of thousand" small shareholders, according to company sources.
If shareholders accept the Lyons recommendation, then the next move will be up to Unilever. Although the company could live with minority shareholder's in Lyons there are reasons why it would like to be in a position to compulsorily acquire the shares.
To do this it will have to obtain acceptances in respect of 80 per cent of the minority stake. This means it will have to increase its stake from 75 per cent to per cent to be able to co acquire the remaining shares.
