Sherry FitzGerald in private deal

SHERRY FITZGERALD is to be taken private in a deal which values the company at €25.8 million — €3.2m less than the company was valued when it floated in April of 1999.

Sherry FitzGerald made a pre-tax profit of €6.6m on a turnover of €30m in 2002. The sale price is a multiple of less than four times pre-tax profits at the company which has €4.2m cash in hand and no bank loans or overdrafts.

Yesterday, Renlin, a takeover vehicle set up by Sherry chief executive Mark Fitzgerald, and the management buyout team announced it had secured irrevocable acceptance from the owners of more that 81.2% of the shares in the company to accept an offer of €1.95 a share. The shares traded at €2.30 each on the day the company was floated.

Securing more than 80% on the shares means Renlin can now compulsorily acquire the remaining shares of the company if the owners do not agree to the offer.

Renlin say the offer is a premium of approximately 71% over €1.14, the average closing price of a Sherry FitzGerald share in the 12 months prior to March 24 2003, the last dealing day prior to the announcement of a possible offer by Renlin.

The independent directors, in a letter to shareholders recommending the acceptance of the Renlin offer, said: “despite the company’s financial performance in 2002, which the directors of Sherry FitzGerald had indicated, in a trading statement on November 19 2002, would exceed market expectations, the closing price of €1.22 per Sherry FitzGerald share on March 24 2003, the last dealing day prior to the announcement of a possible offer for Sherry FitzGerald by Renlin, was significantly below the flotation price of €1.99 per Sherry FitzGerald share in April 1999.

“The recent share buyback programme which cost €1.05 million and which was implemented as an effort to improve the share price has not had a material impact on the price of a Sherry FitzGerald share. This fall in value of a Sherry FitzGerald share from its flotation price is, largely, in the view of Goodbody Corporate Finance and the independent directors, due to the reasons below, which could continue and therefore influence the share price in the medium term: (i) a lack of support from institutional investors for small companies on the Irish Stock Exchange; (ii) Sherry FitzGerald’s small free float with directors and staff holding approximately 64%. of the company’s share capital; and (iii) the limited trading liquidity of Sherry FitzGerald shares.”

Renlin documents show that the buyout scheme is being supported by a €24 million loan from Anglo Irish Bank and that in addition, chartered accountant Pat Ridge and Walter Coakley, a career banker with AIB, have agreed to invest a total of €2 million in Renlin.

The directors of Renlin are: Mark FitzGerald, Mari Hurley, Philip Sherry, Ross McParland, Michael Grehan, Simon Ensor, Marian Finnegan, Clair Cullinan and Ian McCarthy.