independent

Saturday 19 April 2014

16 big business moments of 2013

Workers handle meat at an abbatoir checked by Romanian authorities

From the horsemeat scandal to Ireland’s exit from the bailout, we bring you the 16 biggest business moments of 2013

HORSE MEAT SCANDAL

Investigations by the Food Safety Authority of Ireland detected horse DNA in products supposedly made of beef, from beef burger to lasagne. Silvercrest Foods in Co Monaghan -- part of Larry Goodman's ABP group -- was the initial epicentre of the probe. It made burgers for retailers including Tesco, Aldi and the Co-op. Millions of frozen burgers were removed from supermarket shelves in Ireland and the UK.

'Filler product', comprised of horse meat and beef, is believed to have been unwittingly sourced from Poland and used in the manufacture of the burgers.

The scandal spread. Some products being sold by Cavan-based Liffey Meats were also found to contain traces of horse meat, while some Findus lasagne made by French food processing company Comigel was found to contain 100pc horse meat. In April, ABP sold its Silvercrest plant to Irish firm Kepak.

The debacle had an impact on a number of firms around Europe. Food group Greencore said that the scandal had wiped out 10pc of its ready-meal sales in the UK, even though its products hadn't been tainted. "It was a relief to conclude that our supply chain was not contaminated by horse meat," said Greencore CEO Patrick Coveney in November.

"However, the impact on industry trust on consumer confidence and ultimately on ready-meal volumes was severe."

IRISH BANK RESOLUTION CORPORATION

In February, IBRC, formerly Anglo Irish Bank, was dramatically placed in special liquidation following a late night Dail sitting. The hurried decision to liquidate the bank was taken by the Government as part of its deal with Brussels to restructure so-called promissory notes that were used to bail out IBRC.

The bank's €22bn loan book was then put up for sale. But the liquidation of IBRC has sparked court cases here and in the US. Former IBRC CEO Mike Aynsley and two other former senior executives have sued the special liquidators of IBRC seeking payment of notice entitlements under their contracts.

But if the liquidation of IBRC wasn't dramatic enough, the Independent newspaper group exclusively got hold of internal telephone recordings from Anglo Irish Bank as it faced oblivion in 2008. Former Anglo chief executive David Drumm was recorded speaking with senior executive John Bowe, telling him that Anglo will use the bank guarantee to get money into the bank's coffers.

"We won't do anything blatant, but . . . we have to get the money in . . . get the f***in' money in, get it in," he told Mr Bowe. In response to the fact that the state bank guarantee was resulting in money flowing in from Germany, Mr Bowe sang a couple of lines of 'Deutschland Uber Alles', part of the old German national anthem. The tapes attracted headlines around the world.

Meanwhile, the sale of the IBRC loan books saw loans attached to well-known businesses including Arnotts and Davy stockbrokers put up for sale.

THE GATHERING

In December 2012, just a few weeks before the Government-backed year-long 'Gathering' tourism initiative was due to get under way, Ryanair boss MichaelO'Leary labelled it 'The Grabbing'. At a major aviation conference in Dublin, he claimed that airport, bus and rail charges were being raised just as the event was poised to get under way.

He told the bemused delegates -- who had travelled from around the world -- that the national conference centre was a white elephant. "For those of you who are visiting this country and want to realise why we are broke, you're sitting in it," he said.

'The Gathering' was a big success, though. A number of additional summer services between the US and Ireland were laid on by airlines. Tourism traffic received a big boost, as did services businesses around the country, aided by a 9pc VAT rate.

At the end of November, the Central Statistics Office said the number of visitors to Ireland had increased 7.3pc between January and October, with the numbers from North America 14.6pc higher. The number of British visitors to Ireland was up 5.1pc, while from mainland Europe the figure was 5.6pc higher.

ELAN

Once the biggest company on the Irish stock exchange, pharmaceutical firm Elan headed off into the sunset in 2013. The company became the target of a hostile takeover battle earlier in the year, as US-based Royalty Pharma set its sights on the Irish firm.

Elan had sold its 50pc stake in multiple sclerosis drug Tysabri for $3.2bn (€2.3bn) and had plans to invest a chunk of the money in buying into other drug firms and revenue streams.

It would also continue to receive royalties from the successful Tysabri drug. The takeover effort by Royalty became increasingly bitter and the US firm eventually upped its bid for the Irish firm, valuing Elan at up to $8bn (€5.8bn). But then from the woodwork came drug company Perrigo, also based in the US. It tabled an offer -- worth about €6.3bn -- that was more acceptable to the Elan board, which in turn recommended it to shareholders.

The deal has since been approved and it was due to be sealed by the end of this year. That will result in Elan vanishing from the stock exchange. Perrigo will be tax resident in Ireland, saving it a fortune, while shares of the new combined entity will be listed in New York and Israel. Elan CEO Kelly Martin will also make tens of millions of dollars from the sale of the company.

TAX HAVEN

Ireland was the focus of US political ire during the year as multinational firms, including Apple, came under attack for using the country to reduce their global tax bill.

Two American senators labelled Ireland a "tax haven" for the way in which major corporations could use its tax system to avoid tax. It was claimed that Apple had paid virtually no tax on billions of dollars in profits that had flowed through its Irish units. The senators also claimed that Apple had been handed a special tax deal by the Government, which rejected the claim and strongly refuted the allegation that the country was a tax haven. It was also forced to defend the country's low corporate tax rate. Finance Minister Michael Noonan said Ireland would not become the "whipping boy" for the US Senate.

Other multinationals, including Google and Microsoft, have also used their Irish units to substantially reduce their tax bills, however. Mr Noonan went some way in the October Budget to addressing the tax issue by announcing that a loophole that enabled companies to be incorporated in Ireland but to declare their profits in other low-tax or tax-free jurisdictions would be closed. "Let me be crystal clear. Ireland wants to be part of the solution to this global tax challenge, not part of the problem," Mr Noonan said.

BAILOUT EXIT

On December 15, Ireland exited its €85bn bailout programme. Three years earlier, the IMF, European Commission and ECB had come to town to take control of the nation's finances.

Austerity would be the way to underpin the country's shaky finances and the troika set about telling the Government how to go about it. But with Ireland's borrowing costs having fallen below those seen before the bust, and signs that the economic Armageddon is finally in reverse, there are hopes that the country can now steer a more stable course of economic growth that avoids the boom and bust cycle.

The Government also decided not to exit the bailout with a precautionary credit facility. Eurozone finance ministers backed the decision. Speaking about the bailout exit, Finance Minister Michael Noonan said: "There'll be no brass bands, or champagne. Our intention is not to be exuberant; this is just a stop along the way."

RYANAIR

In March, Ryanair finalised a massive deal to buy 175 aircraft from Boeing, paving the way to boosting its annual passenger numbers from the current 81 million to about 120 million.

The order, worth $15.6bn (€11.4bn) at list price, was the biggest order ever placed by Ryanair and the biggest order ever placed by any Irish company. But Ryanair has since issued two profit warnings on the back of sluggish demand amongst airline passengers.

That hasn't stopped it going all soft and cuddly though. It has introduced a range of measures designed to make life easier for its passengers, including cutting charges and penalty fees. "I've always been soft, just a little bit misunderstood. I can't think of anyone softer, kinder or more caring than myself," said Ryanair CEO Michael O'Leary (pictured right).

FORBES

'Forbes'-- the influential magazine -- ranked Ireland as the best place in the world to do business. It said the country had an "extremely pro-business environment".

The magazine analysed 145 countries based on 11 factors including taxes, technology, investor protection, red tape, innovation and property rights. "Despite economic troubles, Ireland still maintains an extremely pro-business environment that has attracted investments by some of the world's biggest companies over the past decade," said the magazine. "In 'Forbes' eighth annual ranking of the best countries for business, Ireland grabs the top spot for the first time."

INTEREST RATES

Anyone on a tracker mortgage -- about two-thirds of Ireland's mortgage holders -- was relieved when the European Central Bank (ECB) cut its benchmark lending rate during the year, first to 0.5pc in May and then to a record low of 0.25pc in November.

ECB boss Mario Draghi acted as fears persisted that the eurozone recovery couldn't quite gain sufficient traction across the region. With inflation much lower than the 2pc the ECB targets, there was ample headroom for the cuts. The ECB has also held deposit rates for banks at 0pc. But Mr Draghi quelled speculation that he would move to push that deposit rate into negative territory -- making commercial banks pay to keep funds at the ECB.

Such a move would provide further encouragement for banks to boost lending to customers. In the EU's biggest economy -- Germany -- the low 0.25pc benchmark lending rate has drawn some fire. There were claims in the media there that the rate cut was made to assist beleaguered southern European eurozone members and that it had been done at the expense of German savers.

A group that represents Germany's small public banks complained that "low interest rates lead to long-term losses for savers that are comparable to expropriation, because they must accept negative real returns on their investments". Mr Draghi said the rate had been cut because the economy is weak. Inflation fell to 0.7pc across the eurozone in October, spurring fears that deflation may rear its head, which would hinder job growth, spending and investment.

CYPRUS BAILOUT

It took a while, but everyone knew it was coming. On March 25, the European Commission, the ECB and the IMF agreed a €10bn bailout package for struggling Cyprus in a deal that caused uproar on the island and in Russia.

As part of the agreement, the second-largest bank on the island, Laiki Bank, or Popular Cyprus Bank, would be closed. Its €4.2bn of deposits exceeding €100,000 would be placed in a 'bad bank' and deposits below that threshold would be transferred to the Bank of Cyprus. The move would effectively see depositors -- many of them wealthy Russians -- pay for a chunk of the recapitalisation of Bank of Cyprus.

Billions of euro of Russian money was wiped out. It was part of an effort to help spare taxpayers from being hit by bailout costs. But the decision to target depositors had an unexpected knock-on effect. Between them, a number of mostly Russian depositors, will own a controlling stake in Bank of Cyprus through a share conversion programme under the bailout plan. Large depositors at Bank of Cyprus had 47.5pc of their money forcibly converted into shares in the institution. In December, the third tranche of bailout money was approved.

BUILDING COLLAPSE

The international retail sector came under the spotlight after a factory collapse in Bangladesh killed 1,100 people. The Rana Plaza building was used to produce clothing for a number of companies, including Dublin-headquartered Primark, which is owned by Associated British Foods.

Aside from the deaths at the factory, another 2,500 people were injured, many of them so severely that they will never be able to work again in one of the world's poorest countries. There were immediate calls to improve conditions for people working in Bangladesh's garment industry, one of the most important sectors for its economy.

But in September, global trade union IndustriALL convened a meeting in Switzerland with some of the globe's biggest retailers to negotiate a $76m (€55m) long-term compensation fund for the families of people killed in the Bangladesh disaster, as well as those who were injured. Representatives from only nine of the 23 brands that had been produced at Rana Plaza turned up. Those that didn't included Benetton and Wal-Mart.

Primark criticised other retailers for not doing enough to help the affected families of the collapse. By October, Primark said it had provided close to €2m worth of financial and other assistance to affected families. It also planned to start paying long-term compensation to 550 victims, or their dependents, of the firm that was producing clothing for Primark in the factory at the time.

CROATIA JOINS EU

On July 1, Croatia became the 28th member of the European Union. It marked he assimilation of the first former Yugolsav republic to the international trading bloc. Its membership also marked an important milestone for the region two decades after a number of vicious conflicts tore the former Yugoslavia asunder.

"You have undergone difficult reforms and held out the hand of reconciliation," said European Commission president Jose Manuel Barroso. "As an EU member state you have made clear that you will help others follow your path. I welcome this commitment as our union is open to those who share our European values."

Just a few months later, the EU had a pop at Croatia for being in breach of rules related to its deficit and debt levels. The European Commission said that Croatia would have to be put under an "excessive deficit procedure" which sets out the measures the country needed to take to return it to acceptable metrics.

US SHUTDOWN

Another year, another threat of government shutdown in the United States. In 2012, a shutdown of government services had been narrowly avoided as political brinkmanship eventually yielded a last-minute decision to boost the US debt ceiling.

But this time around, the process was even more fraught. Congress didn't enact the legislation required to appropriate funds for 2014 and with Republicans and Democrats digging their heels in, the world's largest economy headed for real trouble. With no deal brokered, government services were shut down for 17 days in October.

That shook international markets, while Goldman Sachs reckoned the shutdown knocked about 0.5pc from the US quarterly GDP. It also forced businesses to delay investment decisions, hampering recovery. Senator John McCain, who was a candidate in the 2008 US presidential election, said the squabble was "one of the most shameful chapters I have seen in the years I've spent in the Senate". In December, a new, longer-term deal was agreed by Congress that will finance the government for the next two years. It will raise government spending to more than $1 trillion (€730bn) in 2014, higher than the $967bn in 2011, which was the previous record.

WORLD TRADE ORGANISATION

In December, the members of the World Trade Organisation signed the group's first ever major agreement, designed to remove international trade barriers and give a $1 trillion shot in the arm to global commerce. "We have put the world back into the World Trade Organisation. For the first time in our history, the WTO has truly delivered," director general Roberto Azevedo (below) said.

It was the first comprehensive agreement hammered out by the WTO since it was founded in 1995. Ministers from 159 countries agreed the deal, which was signed in Bali, Indonesia. "This week has been about high-level diplomacy, long nights and considerable drama," said Indonesian trade minister Gita Wirjawan, who chaired the meeting. "But it has also been about ensuring that the gains of the multilateral trading system reach our small businesses and our most vulnerable economies."

The centrepiece of the agreement is measures to ease barriers to trade by simplifying customs procedures and making them more transparent. But some critics claimed WTO rules might hinder countries from setting their own priorities in environmental protection, worker rights, food security and other areas. And they said that sudden reductions in import tariffs could wipe out industries, causing job losses in rich and poor countries.

NOKIA HANGS UP

Once the biggest-selling global mobile phone handset maker, Nokia hung up on the segment in September. It agreed to sell its handset business and licence its patents to Microsoft in a €5.4bn deal. Nokia will continue to make mobile network equipment, but its exit from the handset segment showed just how dynamic the industry has been over the past decade.

Having failed to successfully challenge rivals such as Apple and Samsung, Nokia was continually on the back foot. In the last two years, it had notched up losses totalling over €5bn. Following the sale to Microsoft, it meant that three of the pioneers of the mobile phone industry -- Nokia, Motorola and Ericsson -- had ceased being independent handset makers or had exited the business entirely.

TWITTER FLOATS

A year after the pretty disastrous Facebook stock market flotation, Twitter lined up for an initial public offering. The seven-year-old business hit the market in November, with a $31bn (€22bn) valuation. Chief executive Dick Costolo (on right of photo) saw his stake valued at over $340m.

Analysts have been split about Twitter's prospects, but in December the shares jumped back up to near a post-flotation high amid optimism that a new advertising product could propel growth. Advertisers will now be able to use subscribers' browsing history and anonymous email addresses to more carefully target their adverts.

Irish Independent

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