Taking a company private

stepbar

Hi all,

Just a quick q I am doin a project in college which basically looks at the companies on the ISEQ / IEX. The aim is to suggest a company on these exchanges for to take private, justify the choice and describe a mechanism for doing so. I have narrowed the short list down to two companies Oakhill plc and Abbey plc. I am more inclined to go for Abbey due to the high amount of cash on the balance sheet and due to the fact that they have started a share buy back program recently, a good sign that management has run out of ideas of where to strategically invest. P/E ratio is low too and has stayed around the same level over the past 5 yrs, 4.5 - 6. earnings have increased steadily from 150mil in 2001 to 200 mil in 2005, share price has also moved steadily from around 4.50 to 11. Compared to McInerney the company looks better value and in fact is worth more if liabilities and debts are stripped out. Can anybody give me recommendations? What do ye think? And also can anybody describe what "mechanisms" are out there?

Cheers
Stephen

DublinWriter

Abbey are part of the FBD Group, itself largely managed/influenced by the Irish Farmers Association, so I'd agree with your assumption about management running out of ideas.

I'm not being sarcastic, I have a 'friend' who did some consultancy work for one of the above mentioned companies recently!

stepbar

I think ur talking about some other abbey, Abbey plc on the IEX is the company im on about
So wat did ur friend say!? sell sell sell???

DublinWriter

Are we talking about the Abbey that do life insurance?

stepbar

No Abbey plc - www.abbeyplc.ie the are house builders mainly serving the uk and irish market they have a plant hire business also

antoinolachtnai

There are different reasons why a company might be taken private, it's worth thinking about why someone would actually do this. Just because it can be done in principle doesn't mean someone will actually do it. There has to be a way to realise value from the restructured entity. Usually this means stripping the property assets out, firing a bunch of people, or developing a new product or marketing it in some new way.

Mechanisms: I guess you mean buying the shares back to reduce the amount of outsider shareholders as a mechanism. Another mechanism is to go to the bank and borrow the money, or issue preference shares. Another thing that might happen is that a venture capital firm would get involved. These last two usually happen if there is a management buyout. The most famous mechanism is the 'Leveraged Buy Out', made famous by razor salesman Victor Kiam. Basically this means issuing debt (i.e. borrowing and issuing bonds) to get the money to buy the company out. Another possibility is for a large private company to buy them with its own resources.

Obviously, this is just a view, don't launch any bids for listed plcs without talking it through with your accountant and/or stockbroker first.

a.