C&C would still see bright red even if flotation goes through
To add insult to injury, C&C rightly pulled its flotation. The word in the market is that the public certainly had no appetite for the launch with applications for stock seriously thin on the ground.
One well-placed broker said the stock would have had to be priced as low as 2 to get it away in the current climate of uncertainty and sleaze.
From an investor point of view C&C was no certainty and is no certainty going forward. Up to 75% of all it earns and sells is in Ireland and a hefty 50-60% of its profits is reliant on cider.
Full marks to the group for bringing it to the point that it has 12% of the beer market against 3% a decade ago.
Past performance is, as it is becoming increasingly obvious, no guarantee of how the future will behave, but C&C could come to the market and say without fear of contradiction that it had a terrific track record.
Analysts think it has a good future too and were generally supportive of the flotation. One of the more senior of them on RTÉ couldn't muster anything more positive than a "good long term buy," a description in hindsight captured the mood about the proposals. Even if the flotation went through C&C would still be saddled with a pretty severe debt mountain and a significant share overhang of the remainder of BC Partners shares in the group which currently holds 90% of the equity.
Post-flotation, it would still have a major minority stake in the business and in the current climate the implication for the shares was not encouraging to say the least. Ordinary investors, stung by the eircom debacle, did not rush in and, of course, they were being asked to pitch for the shares, not knowing what the price was going to be apart from having a 2.60 3.60 guide price range form which to choose.
Another major imponderable, and this will be an issue when punters look at the stock when the management try to float the company at a later date, is the outlook for the economy.
Its growth rate has plunged from a high of 12.5% in the first quarter of last year to the current level of 4%.
The drinks to snack group achieved much of its high double digit growth when the economy was averaging over 9% annual growth over the previous five years, which was a much more benign climate, even for a defensive stock.
Add to that the spate of shock revelations about major US companies from Enron to WorldCom and the unnervingly closer to home Elan and you get the picture. Trust has become a major issue and in a climate of uncertainty investors think twice before they sink their money into a company, that despite its impeccable record is now the subject of much harsher scrutiny that would otherwise have been the case.
In total, C&C has spent about 3m on the build-up to the flotation and future is uncertain at this stage. Will the group now become the subject of a takeover target or will the 90% stakeholder BC Partners try to offload some of its 90% holding elsewhere.
C&C could come under pressure at this stage, and the current dilemma may force it into joint venture talks with HP Bulmer in Britain, owners of such well-known brands as Stongbow and Scrumpy Jack and sponsor of that much-in-the-news soccer club for all the wrong reasons Leeds United.
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