Interesting times ahead for NTR and SWS
Lynch is the former boss of IAWS Plc, floated in 1988, which he turned into a huge success.
It evolved out of IAWS Co-op, where he had been chief executive for a number of years.
Having resigned as chief executive of the plc in 2003, Lynch was not ready for slouching in front of the TV or working on his golf handicap and he has been plotting since last March to take over South Western Services (SWS), based in Bandon.
This involves a minefield of co-ops and co-op interrelationships that boggles the mind.
At its simplest Dairygold, Bandon, Drinagh, Lisavaird and Barryroe own SWS.
They will decide on independence or a merger with Lynch and IAWS. At play here is the Lynch factor and my information is that the SWS board, which lately includes Dairygold chairman John Walsh, and chief financial officer Peter O’Donoghue, favour the Lynch option.
Enter the NTR factor and the €130m splurge by Lynch on NTR shares and the picture changes quite significantly.
Lynch insists the investment in the operators of the lucrative toll road system is passive.
Others insist he never acted passively in his entire career. It’s simply not in his nature.
Again the question is being asked why he went over the critical 25% in NTR if he just wanted a passive involvement for the benefit of his co-op shareholders.
Holding 26% of the equity gives Lynch certain leverage over NTR. He has the power to block a share placing, to call an EGM and he can also veto a takeover.
These are considerable powers and NTR chairman Tom Roche must be seriously regretting he ever called on the services of NCB and Goodbody Stockbrokers to become traders in the shares along with Davy Stockbrokers.
By making the shares more readily available Roche inadvertently paved the way for Lynch to raid the market for his shares.
This Lynch has done with alacrity.
Suggestions he paid €10 per share over the odds are a bit wide of the mark.
Averaged out, the price paid was about 19 per share against €13 back in October 2004. Analysts suggest NTR is probably worth e18 per share suggesting Lynch has not only rubbed NTR’s nose in it but he did it at a price far cheaper than Tom Roche, who paid about €23 per share for his recent uptake that brings him to 46% of the equity.
In off-the-record briefings Lynch continues to play down his intentions, while NTR is convinced his aims are hostile.
Ask Tom Roche, who has shelled out roughly €46m of his own money to get a few extra percent of the equity in NTR in what was a desperate move to put a halt to Lynch’s march on the company.
Since Lynch announced his talks initially with SWS that could lead to a change in the structure of the IAWS Co-op, the momentum has changed.
It is expected that the merged IAWS/SWS will be floated on the gray market within three years, where it can rub shoulders with NTR.
But the NTR move looks to have changed everything. Lynch has only about five years left to go before retirement.
His way of operating could hardly be described as conventional as he carved his name across the Irish business scene.
All that can be said is that as a direct consequence of his moves on the two companies both NTR and SWS are looking at very interesting times ahead.
There is one other point in all of this. Lynch’s ambitions for IAWS and SWS are likely to be met, but it is far from certain that, if he has serious ambitions to grow IAWS with NTR’s Greenstar as part of the enlarged group, he can deliver on that particular ambition.
Tom Roche will have something to say about that in time.
So far he has spoken with his own money: €46m of it to be precise.
