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M&A Deal Directory 2003 Back  
Deals in excess of €50m
MBO of Conduit plc
Acquirer: Kandel plc
Target: Conduit plc
Acquirer Advisor: Goodbody Corporate Finance
Target Advisor: Davy Corporate Finance
Acquirer Legal Advisor: LK Shields
Target Legal Advisor: Mason Hayes & Curran
Origin of Acquirer: Ireland
Origin of target: Ireland
Date of Announcement: 26/11/02
Date of Completion: 30/01/03
Consideration: €55.4 million

The principal strategic objective of Conduit in 2003 is to capture a significant share of the UK directory assistance market following its recent deregulation. This involves significant expenditure on marketing and advertising their directory numbers and services and hence significant uncertainties and execution risks involved in achieving the company’s targeted market share. Against this background and the poor share price performance, the management team decided to make an offer for the company in order to take it private.

The offer of e3 per Conduit share received from Conduit’s management team represented a premium of 41.5 per cent over the average price for the previous 90 days prior to the announcement. The management team which owned 47.9 per cent of the shares rolled their entire investment into the bidding vehicle and the balance of the funding was in the form of debt facilities provided by Royal Bank of Scotland.

Two unusual features of this transaction were the fact that no 3rd party equity provider was required to assist in the funding, and the fact that the entire board of Conduit were shareholders and directors in Kandel.

Profile by: Bobby O’Brien.

In the recent spate of take-privates of Irish quoted companies this certainly ranks as one of the most unusual from an advisers perspective. The management team decided to initiate a proposal to privatise the company, but unusually each of the non-executive directors of the company decided to form part of the bidding company.

This created the situation where there was no independent board to evaluate the management offer as is usually the case. Davy Corporate Finance was approached to act as Rule 3 adviser to the company and to effectively evaluate the merits of the offer on behalf of the shareholders.
The initial approach by Kandel was at €2.75. After negotiation this was increased to €2.83 and eventually to €3 per Conduit share. An important feature of the offer that was eventually recommended by Davy was the inclusion of an opportunity for Conduit shareholders to ‘roll’ their shares into Kandel shares and thus to share the risks and rewards of the Company’s future strategy with the management. This was decisive in removing any grumbling by shareholders that they were effectively being ‘squeezed out’. Consequently, the deal ran smoothly and avoided most of the criticisms that other such transactions have attracted.

Profile by: Ivan Murphy.

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