Cairn Homes founders get 'private equity' bonus offer
Housebuilder which raised €400m in last week's IPO has yet to build anything, writes Business Editor Nick Webb
Published 14/06/2015 | 02:30
Cairn Homes, the Irish housebuilding firm that floated on stock markets last week, is offering its three founders a "private equity-style" incentive package to push them to grow the company.
Under the scheme, Irish builders Michael and Kevin Stanley and UK financier Alan McIntosh will be entitled to 20pc of any shareholder gains if the share price rises more than 12.5pc per year.
This means that if the €430m-valued firm's share price doubled over the next year, giving a market capitalisation of €860m, the three founders could receive shares worth 20pc of the €430m gain.
A smaller 20pc rise in the share price could see the three founders get around €17m.
However, despite the investor interest in Irish housebuilding, the shares are unlikely to rise by that much. Shares in Ireland's only other listed housebuilder, Abbey Plc, doubled between 2012 to 2013 but have marked time over the last year. The Irish Residential Property REIT has seen its share price rise around 10pc since its IPO last year.
"The Founder Shares held by New Emerald LP, Michael Stanley and Kevin Stanley, enable them to receive 20pc of the total shareholder return over the seven years following admission, subject to the satisfaction of the performance condition, being the achievement of a compound rate of return of 12.5pc per annum in the company's share price," according to documents circulated to institutional investors.
Sources have told the Sunday Independent that the blue-chip roster of institutional investors that subscribed for shares in the €400m IPO were strongly supportive of this incentive scheme as it aligned the founders' interests with those of the shareholders.
Wall Street billionaire Louis Bacon's Moore Capital, Mayfair hedge fund Lansdowne Partners, FMR and Fidelity Worldwide each own 7pc of the firm. Other major investors include GLG Partners, Arrowgrass Capital, UBS and JP Morgan Asset Management.
Kevin and Michael Stanley and Alan McIntosh own a 6.8pc stake in the builder.
Cairn has contracted to buy a number of sites with a gross development value of €366m. It is also actively examining plans to buy another nine sites that could be used to build 3,880 homes in Dublin and Cork which could have a gross development value of €1.8bn. The firm has yet to build anything.
Cairn Homes is buying a number of sites owned by an entity controlled by Alan McIntosh and his wife and has an option to buy a Navan development site controlled by an entity which is 90pc owned by Kevin Stanley's wife.
The sites owned by McIntosh will be bought at cost and the Stanley site may be bought at a 20pc discount to a 'red book' valuation if it receives planning permission.
"As a PLC, Cairn Homes is fully committed to full transparency of transactions. The prospectus provides all details about the investment offering, the structure of the company and the pipeline of sites available to Cairn," it said.
Sunday Indo Business