Changes in structure of Dunnes’ trust

OUSTED Dunnes Stores boss Ben Dunne said the changes in the structure of the family trust disclosed yesterday “opens up a lot of possibilities, good and bad” for the group.

What those are “I’d say the family doesn’t even know themselves” at this stage, he said.

Potentially, could it mean the sale of the €2 billion retail chain under intense pressure from Lidyl and Aldi on the food side and Pennys in the clothing sector? Mr Dunne answered: “I don’t know.” Market sources dismiss the sale or takeover speculation about the family business, now in its third generation of Dunne ownership.

It is thrown up from time to time, but one key industry source said it was no more than a red herring.

Changes to the trust are a mechanism to reward the third generation of the family and to keep them involved in the business, said an industry source.

Under the new arrangement, the trustees hold a new single “special preference share,” suggesting clearly the business is not for sale. Mr Dunne said that previously all the ordinary shares were held by the trustees.

The rule shifts governing the trust were approved at an extraordinary general meeting in April 2002 and are significant in their implications.

Experts say they will facilitate a much bigger transfer of wealth and share ownership not possible under the former trust set-up.

It should also make it easier to award family members directly involved in the business. Significantly, the changes allow for the sale of shares to non-family members for the first time, but that can only be done if other family members don’t want them. The possibility of an eventual break-up of the trust could be allowed for under the new set-up, but the nature of the adjustments suggest a long-term commitment by the Dunnes to hold on to the business.

It is reckoned the new mechanism is just a facility to allow the family to reward themselves under a more flexible trust while retaining the integrity of the family empire in the longer term.

However, the shift in share structure ought to allow for substantially enhanced rewards for family members involved in Dunnes Stores without interfering with the integrity of the trust Future wealth created by the group will be attributed to the ordinary shares allowing the wealth to be distributed to the family.

To shore up its market Frank Dunne has returned as managing director after an eight year absence,

Margaret Heffernan, his sister, who took over after Ben was removed from the company and the trust, is listed as director of textiles, suggesting she has relinquished the top job to brother Frank. Both siblings are worth close to €400m each with the substantial portion of that attributable to their respective stakes in the business.

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