A management buyout (MBO) led by chief executive, Mr Tony Mullins, has offered €70 million for Dublin-listed industrial group, Barlo, ending seven months of speculation about the company's future.

The MBO company, Melgan, announced yesterday that it had made a cash offer for the radiator and plastics group, valuing it at 40 cents a share, or €70 million.

The group's independent directors, chairman Mr Niall Carroll and Mr Sean Farrell, told a press conference yesterday that they would be recommending the offer to the industrial group's shareholders.

If shareholders approve, the deal will also see the management of Barlo subsidiary, Athlone Extrusions, buy out that business and de-merge from the group.

The proceeds from that will be used to part-fund Melgan's offer.

As the MBO is also buying out Barlo's €123 million in debts, the deal will cost Melgan over €190 million. The Irish Times understands that equity will make up one third of this, while the rest will be made up of loans from Bank of Ireland.

Anglo Irish will provide the debt financing for the Athlone Extrusions buyout. Mr Carroll said yesterday that both deals were interdependent, and if shareholders failed to support one, the other would not succeed.

Melgan is backed by Mr Mullins, most of the Barlo board, and a number of high-net-worth individuals, who, it is understood, are committed to at least €1 million each.

It is in a position to command the support of 27.3 per cent of the company's issued share capital. It will need 80 per cent to succeed when the issue goes to an extraordinary meeting in approximately six weeks' time.

The 40-cents-a-share offer is €17.5 million more than the value the MBO placed on the company when it made an initial approach last July. At that point it made an indicative offer of 30 cents a share or €52.5 million.

Analysts subsequently argued that this under-valued the company, and said 45 cent to 50 cent would be more realistic.

However, Mr Carroll told a press conference yesterday that the brokers' assessments were based on an under-statement of the company's debt.

The document detailing the offer states that Barlo's average net debt position at the end of December was €123.6 million.

The chairman said that the analysts had based their arguments on debts of €110 million to €115 million. These figures were drawn from the company's own year-end results.

Mr Carroll said that as the company's business was seasonal, and its year end coincided with the end of its busiest period, its reported debt was lower than its year-round average.

"The normalised debts are higher than the figure that the brokers have been working off," he said. "We have given a last six months average to give a fair view of what the debt really is."

He argued that taking this into account, the offer was fair and reasonable. Mr Carroll also stressed that the debt was dropping.

However, Merrion Capital analyst, Mr John Mattimoe, last night argued that the MBO offer still undervalued Barlo.

He said a price of 45 to 50 cents would be more appropriate.

This would represent 5.5 to 5.7 times earnings, which was in line with the sector average.

It is not unreasonable that the business would be running with €110 million to €115 million in debt going forward, Mr Mattimoe said.

Mr Mattimoe added that the group was generating €15 million to €17 million in cash a year, despite the fact that it was trading through a difficult period in its industry.

He pointed out that this would allow it to manage its debt level.