Lynch spearheads One51 expansion plans
Any suggestions the failed attempt to incorporate key parts of SWS of Bandon into the group might damage future prospects look to be wide of the mark.
Lynch had targeted the waste and wind energy parts of SWS operations, but internal struggles and management divisions over the future of the Bandon Co-op resulted in the talks being abandoned.
As the group moves to its next strategic phase, the SWS debacle looks to be dead and buried and it is unlikely Lynch will attempt to reopen negotiations.
Details of the next phase of the One51 development have been sent to shareholders, who have until Wednesday to decide whether to sign up for convertible loan notes to be issued to generate cash.
An internal document, sent to all shareholders, reveals the group is planning to issue €50 million of convertible loan notes, and all stakeholders, mainly the bulk of the Irish co-ops, have been given the option to buy into the offering.
One51 is to take over most of the assets of IAWS Co-op, as the newly constituted private company moves to expand its interests in wind energy and waste management - part of the IAWS restructuring.
In addition to the €35m being offered in loan notes to shareholders, One51 is proposing €15m be made available to directors, managers and employees.
According to the document, a trust will be set up to determine the allocation to workers and the aim is to have the shares allocated by January 16, with payment due by January 27 to secure the investment.
Given that the group has plans to float on the stock market by the third quarter of 2006, Lynch is expected to add to the portfolio of businesses. Independent assessors have valued the crop of businesses at €200m.
The group owns Irish Pride bakery and Premier Proteins, has a 50% equity stake in Greenore Port, and interests in the group’s head office on Dublin’s Thomas Street and TechRec.
According to some, the stand-out investment is the group’s 26% stake in NTR, bought for roughly €120m earlier this year.
By December this year, the group has informed shareholders, it will have net assets of €167m, which Davys and NCB have valued at €200m. These were two separate assessments and are critical in terms of the loan note offerings.
These are being offered at €3.37 per share, valuing the business at €150m, according to the document, and giving investors a 25% discount in the process.
If, as some suggest, NTR is the star investment, it is worth noting it accounts for nearly half of the €200m valuation of the group.
Under the terms of the development package, it has emerged that Lynch is to get a three-year contract as chief executive with effect from the end of the month.
Michael Long will be offered a one-year rolling contract as general manager, while finance director Paul Dixon will also get a deal.
The loan notes will be convertible to shares in One51 or paid in cash at the end of the fifth year, provided the group hasn’t been floated, but flotation has to be a priority if Lynch is to achieve his ambitions.
The big question is if IAWS Co-op stakeholders believe Lynch can do with the group what he accomplished with IAWS Plc, of which he was the first chief executive.
Over a 10-year period the share was the best performing food stock in the world but One51 is a different proposition.
However, in waste management and wind energy Lynch has identified two key growth areas that contain huge potential.
It is highly likely this part of the process will go well for the newly constituted group and the co-ops, who made millions out of the Plc, will not be shy in supporting this latest venture.
SWS may live to regret its decision not to hitch its wagon to Lynch’s star.
