FINANCIER Mr Dermot Desmond has made his first venture into the agri-business sector, spending around £6.2 million to acquire a 5.82 per cent stake in Golden Vale. The shares will be held in the name of his company International Investments and Underwriting, according to information given by Golden Vale to the Stock Exchange yesterday.

Mr Desmond's company has already built stakes in the engineering groups Unidare, Barlo and Jones, but his purchase of the Golden Vale stake took the market by surprise. Analysts speculated last night that he may feel that Golden Vale shares are undervalued, as they are trading close to historic lows. The share closed 1p higher at 65p yesterday, although the news of Mr Desmond's purchase may have come too late to have a significant impact on the share price.

The shares traded as low as 58p recently after Golden Vale revealed that it has made a payment of £3.1 million to the Department of Agriculture following the miscalculation of a milk super levy bill. The shares have now recovered to their level before the news of the super levy bill. However, its market capitalisation at £107 million is still well below the record £208 million reached in 1994, or even the £139 million capitalisation when it reached its 1996 high of 80p.

Mr Desmond may also have looked at the possibility of the much talked about rationalisation in the industry, which could raise the value of his stake in the medium term. A number of leading figures in the industry have raised the prospect of rationalisation in recent months.

While no moves appear imminent, industry speculation would be that Golden Vale and its neighbour the non quoted co-op Dairygold, would be candidates for a merger, if the industry moved in that direction. Golden Vale would then certainly believe that the valuation of its shares would be substantially higher than the current trading level.

Golden Vale is one of the biggest dairy processors in both the Republic and the North producing processed cheese, dairy spreads and milk powder. It also owns businesses in Britain and Holland and is the third largest processed cheese producer in Europe.

Around half the shares in the group are held by farmers and in recent weeks Irish institutions are believed to have been net sellers of shares. Brokers are also believed to have considered downgrading profit forecasts of £17.5 million for this year in the light of the super levy bill.

As well as the Golden Vale stake, Mr Desmond's IIU has also recently bought a 5.9 per cent stake in Unidare, a 3.3 per cent stake in the Jones Group and 3.5 per cent of radiator and plastics group Barlo.