Magnier may be behind €370m bid for Scottish firm

Speculation is growing that bloodstock supremo John Magnier is involved in a €370 million bid to buy a Scottish food company.

Sausage skin manufacturer Devro confirmed this week that a potential buyer had made a preliminary approach valuing pricing the company at £244 million (€370 million).

Mr Magnier, one of the principals of Tipperary-based Coolmore Stud, owns 14 per cent of the business through a Swiss investment company, Acomita.

Subsequent reports suggested that he is behind the latest approach. At the same time, sources speculate that it could be sold to Spanish rival Viscofan, or to another food processor.

Yesterday, Bell Lawrie investment analyst Gordon Culfeather said that a buyout would make sense for the Irish businessman.

Mr Culfeather argued that Devro has reached a plateau in terms of growth and that other big shareholders in the group would welcome the opportunity to exit the stock.

"If you take into account that it's a reasonable price and that it's cash generative, then it's not outlandish that he is involved," he said.

He said that Mr Magnier bought into Devro at between 40 pence and 51 pence sterling. Its shares closed at £1.41 in London yesterday, while the preliminary offer indicates a price of £1.50.

The analyst said that the most logical route for Mr Magnier to follow would be to join forces with a private equity house.

If the partnership were successful, then he would have a number of options.

These could include selling on his stake to the private equity house, or to break up parts of the business and realise its value through the sale of some of its assets.

Even if he is not behind the approach, Mr Magnier is likely to play a key role in any deal, as he is Devro's biggest shareholder, and one of six who control 45 per cent of the company.

These include Schroder, which recently upped its holding to 9 per cent from 7 per cent, Axa Barclays, and Legal and General.

Spanish mutual fund Bestinver Gestion holds 8 per cent, and has a parallel stake in Viscofan.

Analysts believe a sale to Viscofan could hit competition law barriers, as it would create a dominant player in the European market for their products.

Another option for Devro that observers believe to be likely is a sale to, or merger with, a food processor, with anyone who produces sausages and buys the company's products considered to be a live candidate.

The Scottish company issued a profit warning last November, and its chief executive, Graeme Alexander left the firm. Profits for last year are expected to drop to £17 million from £25.8 million in 2005.

Its shares traded as high as £1.4775 earlier this week as the board announced that it had been approached.

However, the shares dipped 6.75 pence yesterday.