Desmond takes 6% stake in Barlo

THE takeover of the plastics and radiator group Barlo took a surprising turn yesterday after it emerged that Dermot Desmond has taken a 6% stake in the company.

Over the past few days Mr Desmond bought a further 1.2 million shares in Barlo early in the week.

Barlo’s management, led by chief executive Dr Tony Mullins announced a 40 cents per share takeover of the company.

The sudden appearance of Mr Desmond as a large shareholder is surprising as many brokers had assumed that the management buyout was a done deal. It is not known if Mr Desmond will reject the MBO, but it is an unusual move to increase a shareholding when the company is set to delist from the market and the shares are trading close to the offer price.

Dr Mullins’ attempt to buy out Barlo requires the approval of 80% of shareholders before it can go through. Although Mr Desmond’s stake alone is insufficient to block the bid at the moment, there may be investors out there who believe that the company is being bought on the cheap and reject Dr Mullins bid.

Merrion Stockbrokers said the offer, while on the surface reasonable, does not take into account Barlo’s “significantly reduced cost base” and its ability to generate cash going forward to return its debt.

“Indeed, from a trading perspective, the group is well positioned for a strong rebound in earnings and cashflows if or when the eurozone economic recovery gains momentum.”