Fallout just beginning from failed SWS deal
Lynch pulled out because he saw the writing on the wall. To categorise this attempted deal as fraught with internal difficulties is an understatement.
The notion of two opposing camps fails to describe the disparity of views that had to reconcile to reach agreement, and with hindsight the move was probably doomed from the start.
Sources close to the talks suggest that while the effort to broker a deal may be over, the fallout may be just beginning and could lead to a lot of interesting information emerging before long.
In the end it looks as if Dairygold was the only one of the five co-ops totally committed to the deal.
Shareholders made up of the four West Cork co-ops look to have been deeply divided about the best way forward for the group.
Add to that a divided SWS management and the cocktail was pretty potent.
Lynch and IAWS are the first casualties of tensions unleashed when merger negotiations were first mooted more than 12 months ago. The idea was to bring key parts of SWS in with IAWS and float the combined assets on the stock market.
SWS has significant potential and employs more than 400 people in a variety of activities.
Lynch eventually agreed a €64 million offer for key parts of SWS, including its wind and waste management divisions.
Of that €16m was due to go to the management and others under the terms of a private deal done between the SWS Co-op board and the group’s management. The deal has been a bone of contention and it has been suggested the prospect of management getting €16m may have been a problem for some of the co-ops.
Drinagh Co-op’s decision last week to change its mind on the Lynch offer was a turning point in the saga.
Several other subplots were also simmering below the surface as the due diligence by IAWS was working its way through.
Sources close to what’s been going on suggest that even within the co-ops divisions existed about the proposed deal with IAWS.
Because the decisions were taken behind closed doors it is impossible to say for sure where loyalties lay or lie in all of this.
It is felt Dairygold, which was completely behind the sale, may have alienated some of the others. History suggests there is no love lost between the West Cork co-ops and Dairygold.
But what is critical here is the future of SWS and the jobs that go with it. The events of the past 18 months suggest further tensions and revelations before this issue is finally laid to rest.
In a recent alternative plan put together on behalf of a number of the West Cork co-ops it was suggested management’s share in the business would be cut to 10% from 40%.
It was Dairygold, which owns 53% of SWS, who first made an issue of the 40% stake and forced management to accept a lower 25% holding in the run up to the anticipated deal with Lynch. Some in the co-ops are still angry management got agreement for such a generous deal in 2000. That 40% stake entitles them to 40% of the profits of the group which in a few years could be in double digits.
That deal still wrankles with some and management may come under further pressure over it by the time this saga has been fully played out.
It’s ironic that in the quest for better value for key elements of SWS the whole question of who is getting what has become the issue rather than the strategic plan for the businesses.
The breakdown in talks has left as many unhappy as satisfied punters in its wake. SWS and the promise it holds could be undermined if the infighting that destroyed the prospects of a deal with IAWS and Lynch is allowed to continue.
Future funding is critical to getting the most out of SWS and the question facing the co-ops is: Where will they get the money now they have pulled out of the deal with IAWS?
