In the Matter of the recommended cash offers by Salomon Smith Barney on behalf of Stoneworth Investment Ltd for all of the ordinary and preference shares of Fitzwilton plc (“Fitzwilton”)
AND
In the matter of the Irish Takeover Panel Act, 1997 (“The Act”),
the Irish Takeover Panel (“the Panel”) has ruled, in relation to an application by Mr. Neal Duggan, as follows:
RULING OF THE PANEL ON 18TH JULY, 1998
(Delivered by Mr. Daniel O’Keeffe, S.C., Chairman on behalf of the Panel comprising the Chairman, W. McCann, K. Beaton, A. Fitzgerald,
D. Kitchen and P. Sykes.)
An application has been made to the Panel by Mr. Neal Duggan to make a ruling as to whether Messrs. K. McGoran, V. Ferguson, P. Dowling, Senator M. Hayes, L. O’Hagan, D. Flinn, C. Collins and P. Power, or any of them being directors referred to as “Independent Directors” in the offer document issued by Salomon Smith Barney on behalf of Stoneworth Investment for all the Ordinary and Preference shares of Fitzwilton, had a conflict of interest and so should have been excluded from the formulation and communication of advice to shareholders in accordance with Rule 3.1(a) of the Irish Takeover Panel Act, 1997 Takeover Rules (“the Rules”) made under the Act (“the Act”).
A further application has also been made to the Panel by Mr. Duggan to make a ruling as to whether the foregoing persons, or any of them being directors referred to as “Independent Directors “ in the Offer Document, had a conflict of interest and so were not capable of giving independent advice to shareholders to enable them to reach a properly informed decision as to the merits or demerits of the Offer in accordance with Rule 23(a) of the Rules and Principle 4 of the Scheduled Principles applicable to the Act.
A final application has been made to the Panel by Mr. Duggan to make a ruling as to whether the aforementioned persons or any of them being directors referred to in the Offer document had a conflict of interest and so were not capable of acting in disregard to their personal interest when giving advice and furnishing advice to shareholders in relation to the Offer in accordance with Principle 8 of the Scheduled Principles.
The Panel, for the purpose of making such rulings, decided to conduct a Hearing. This Hearing commenced on the 10th July. Evidence was taken on the 17th and today, 18th of July.
The conflict of interest alleged can be summarised firstly in the degree of the personal and business associations between the aforementioned persons and Dr. A.J.F. O’Reilly, Chairman of Fitzwilton and director and major shareholder in Stoneworth Investment, secondly Mr. Flinn’s directorships in companies associated with Salomon Brothers or Smith Barney or Salomon Smith Barney, advisers to Stoneworth, and finally the position of Messrs. McGoran, Dowling or O’Hagan as executive directors of Fitzwilton.
No evidence was tendered or adduced against Messrs. Collins and Power at the Hearing.
The evidence adduced establishes, to the satisfaction of the Panel:
1. That Messrs. McGoran, Ferguson, Dowling, O’Hagan, Hayes and Flinn had each a personal and business association with Dr. O’Reilly over different periods and to varying degrees.
2. Messrs. McGoran, O’Hagan and Dowling had directorships in various Fitzwilton subsidiaries and other companies in which Fitzwilton had an investment, including, in the case of Mr. McGoran, a directorship of Waterford Wedgwood plc, in which Dr. O’Reilly had an interest and is Chairman. These directorship appointments were made by virtue of the executive roles of such persons in Fitzwilton.
3. Mr. Ferguson and Dr. Hayes were directors of Independent Newspapers plc, of which Dr. O’Reilly is Chairman. Mr. Ferguson held such position from 1973 and Dr. Hayes from 1992.
4. Messrs. McGoran, O’Hagan and Dowling were executive directors of Fitzwilton. In respect of their executive contracts of employment, such contracts were, as expressed on page 63 of the Offer document at paragraph six, service contracts which did not have more than 12 months to run and no such contract had been entered into or amended whether in respect of an increase in remuneration or otherwise, within six months preceding the date of the Offer document.
5. The remuneration of Messrs. McGoran, O’Hagan and Dowling was fixed by the remuneration committee, of which Dr. O’Reilly was Chairman. The last review was in September 1996.
6. Mr. Flinn was a director of Salomon Bros. Asset Management (Ireland) Limited, Salomon Brothers Funds plc and Smith Barney Management Company Ireland Limited. Such companies of which he is a director have no direct relationship with Salomon Smith Barney other than being part of the same world-wide financial group.
7. All of the Independent Directors, comprising in particular Messrs. McGoran, Ferguson, Dowling, Hayes, O’Hagan and Flinn, obtained legal advice between November 1997 and May 1998 on their duties and obligations in relation to the Offer.
On the basis of such findings, the Panel concludes that Messrs. McGoran, Ferguson, Dowling, Hayes, O’Hagan, Flinn, Collins and Power did not have a conflict of interest within the meaning of Rule 3.1 of the Rules. Accordingly, such persons should not be excluded from participating in the formulation and communication of advice to shareholders in accordance with the provisions of the Rules.
Having regard, therefore, to these findings and conclusions, the Panel rules that such persons already mentioned above:
(i) did not have a conflict of interest and so they should not have been excluded from the formulation and communication of advice to shareholders in accordance with Rule 3.1(a) of the Rules
(ii) did not have a conflict of interest and were capable of giving sufficient independent advice to shareholders to enable them to reach a properly informed decision as to the merits or demerits of the Offer in accordance with Rule 23(a) of the Rules and Principle 4 of the Scheduled Principles
(iii) did not have a conflict of interest and were capable of acting in disregard of their personal interest when giving advice and furnishing information to shareholders in relation to the Offer in accordance with Principle 8 of the Scheduled Principles.
The Panel further rules that the text of this ruling shall be published by issuance to the Company Announcements Offices of the Irish Stock Exchange and the London Stock Exchange.
Executed this 20th day of July, 1998
PRESENT when the Seal
of the IRISH TAKEOVER PANEL
was affixed hereto:
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