SWS deal almost done but questions remain
The story isn’t over yet however and some speculation surrounds what settlement IAWS boss Philip Lynch will reach with the existing SWS management.
What’s emerging is that the deal is as good as done and the West Cork societies and Dairygold are happy to accept Lynch’s €42.5m offer for their 75% stake in SWS. That price tag can grow to €64m provided certain forecasts are met over the next three years.
Prior to the deal SWS management held a 25% stake in SWS. What their holding in the enlarged group will be remains to be seen. SWS management rightly maintain their deal with the co-op shareholders is private and none of the media’s business, which leaves the value of their stake open to speculation.
On the basis of the projected e64m price tag on the table for the group their stake is worth €20m. However, if some of the top management were to quit, the deals they make individually with Lynch are a matter for conjecture. Formal details of the structure of the management deal have not been released but it is believed to involve 20 of the top management ranging from an 8% stake for chief executive Kieran Calnan, to a 4% stake for John McCarthy and so on down the line.
However, once its wind farms and other projects kicked in the projected valuation of SWS was €330m.
This would value the holdings of Kieran Calnan and John McCarthy considerably higher, possibly as high as €10m and €5m respectively.
Those projections are no longer relevant, but they highlight the generous nature of the package SWS management had negotiated for themselves with the board of SWS.
Not that there is anything wrong with management negotiating a good deal. To date they have proved their worth and created several hundred jobs in the process.
Lynch’s willingness to buy the company to use as a springboard into the wind and waste management sectors of the Irish economy is further testimony to their achievements.
However as the full details of the agreement are not being made public the extent of the deal may never be known.
That aside it looks as if the current chapter in SWS’s history is drawing to a close and the takeover by IAWS will have the green light before the week is out. For many the next chapter in the development of the group will be the more interesting. It remains to be seen what the new entity will amount to in the years ahead.
The five dairy co-op shareholders decided to throw in their lot with Philip Lynch at the end of the day. Rumour had it they were prepared to accept even less from Lynch than was on the table, rather than have him walk anyway from the deal. This is a huge tribute to Lynch, whose own family farm is within a few miles of Bandon.
Lynch has promised to float the company within three years. However, critics argue his €130m investment in National Toll Roads (NTR) earlier in the year has put a serious question mark over that strategy
They argue he paid too much, but a report is rumoured to be due that will put a value of €24 per share on NTR. That would suggest Lynch, who bought in at an average price of €19 per share has done very well out of his €130m raid on NTR.
While no corporate ties exist between the IAWS society and IAWS Plc, emotional ties and practical ties still exist.
IAWS Co-op still holds 11% of the shares in the Plc, but Lynch has promised to release those back to the broadly based co-op shareholder group in the years ahead.
At current prices the pay back will be about €130m, but sceptics are waiting to see this happen before they will believe it’s true.
