The ups and many downs of Irish business in a hugely eventful year
Some of Ireland's more memorable moments and downfalls in business over the past year, are selected by Roisin Burke
Published 01/01/2012 | 05:00
EU debt crisis summit
Which one, you might well ask, as it seemed as if there were about 951 debt crisis summits in 2011 as Europe courted fiscal disaster over and over again.
We're talking about the final one in Brussels, a three-shirter that ran over a gruelling weekend in Brussels in mid-December. It's supposed to have solved all our problems just in time for Europe's politicians and bureaucrats to get away to the slopes in Zermatt for their Christmas holliers.
With 'Merkozy' cracking the whip, EU leaders agreed to pursue tighter integration with stricter budget discipline, stricter deficit and debt rules in the eurozone and the beginnings of a united front against the crisis. The newly minted term "fiscal compact" emerged.
The ECB committed to providing three-year liquidity to the eurozone's blitzed banks, averting another awful credit crunch, and banks quickly snapped up €489bn.
The new European Stability Mechanism that replaces the EFSF in July will have firepower of €500bn.
The other big question is whether all this is enough to ward off market attacks on weak eurozone debtors. Meanwhile, expectations are that the eurozone will slide into recession at the beginning of this year.
Shares in Europe and on Wall Street rose after the summit, but many unanswered questions remain and the joyful possibility of a referendum here in 2012 looms.
The 17th crisis-fighting summit for EU leaders will be held at the end of this month, and the fiscal compact is supposed to come into being in March.
The Irish stock
The Irish building materials group CRH switched its primary listing from the ISEQ to the FTSE 100 this month.
Convenience food giant Greencore followed suit, announcing that it was removing itself from the Irish stock exchange to focus on luring more British investors by listing on the FTSE.
The move by two big players prompted questions about the ISEQ's future. The value of shares traded has sunk to just 20 per cent of its 2007 peak of €200bn a year, with the banking collapse and share disintegration of the Irish banks playing no small part in that.
A VAT hike, the knock-on rise in fuel and electricity prices and a €3.8bn slashathon that will restrain consumer spending even more -- the Budget was every bit as grim as the many kites flown before had suggested it would be.
But there was some glimmer of silver lining for business, such as allowances for exporters who work abroad more than 60 days and the extension of the corporate tax breaks for start-ups to 2014 and improvements to the R&D tax credit scheme.
AIB top posts
David Duffy became the new CEO of AIB, following a year-long hunt for a successor.
The former Standard Bank International boss will be paid within the €500,000 cap on bank executives set down by the Government. Predecessor Colm Doherty stood down in 2010, with a controversial €3m final pay packet.
Fifty-year-old Duffy previously worked for Goldman Sachs and the ING group.
AIB appointed EBS chief executive Fergus Murphy to head up the bank's 'transformation programme' -- ie, its mission to overhaul and restructure the bank and implement 2,000 redundancies.
The Global Irish
Some 300 major national and international figures gathered for the Government's gigantic thinking shop (chapter two) at Dublin Castle in October.
Did anything more than hot air emerge? A plan to increase the number of tourists coming to Ireland by at least 300,000 was hatched and a new online platform to engage with the Irish diaspora through social networking was launched.
Aer Lingus row
Ryanair kicked up a hell of a fuss to force Aer Lingus to call an Emergency General Meeting towards the end of the year, but to no avail.
A 30 per cent shareholder in Aer Lingus, Michael O'Leary's low-cost carrier wanted to get Aer Lingus to release the contents of an internal report on the 2008 leave-and-return-to-work scheme that led to a €30m tax settlement. It is also determined to stop Aer Lingus putting more funds into its pension scheme, which has a €500m deficit. It hoped that a shareholder vote at an EGM would help its cause.
Aer Lingus refused to call the meeting -- and Ryanair vowed to continue pushing for it, through the courts if necessary, to raise the two issues. But ultimately Ryanair had to admit defeat -- it had no way to force the EGM.
A legal showdown about the pension fund could be on the way this year.
Unlike AIB, Bank of Ireland avoided complete State ownership, attracting a group of foreign investors that included billionaire 'bankruptcy king' Wilbur Ross's New York buyout firm.
The US and Canadian investors took a 34.9 per cent stake for €1.2bn, cutting the State's share in the bank from 36 to 15.1 per cent. Besides Ross's firm, investors are Fairfax Financial Holdings, Fidelity Investments, Capital Group and Kennedy Wilson.
This made Bank of Ireland the only Irish bank to escape nationalisation. Ireland will clear its debt and "once again become the Celtic Tiger" Ross said, when commenting on his investment.
Grafton Group boss
Chadwick steps down
One of Ireland's longest serving bosses stepped down after more than 30 years.
Michael Chadwick joined Grafton Group in 1975 and became executive director from 1979. He retired as executive chairman in July last, handing over the reins to Gavin Slark and switching to a non-executive role.
During his time running the building supplies company that owns Atlantic Homecare and Woodie's, sales grew 30-fold -- and even in the face of construction sector meltdown the firm remains profitable: to the tune of €52m in 2011.
Canny Chadwick transferred more than 2.6 million shares to family members just ahead of the Budget, avoiding the increase in capital gains tax that it brought.
Grafton Group emerged from the family business founded by Chadwick's grandfather William. It was one of the first big companies on the Irish stock market. His family shareholding of the business is worth €50m plus.
The insurer greatly reduced its volatile property market exposure by spinning off its €180m property and leisure portfolio into a joint venture with Farmer Business Development.
The investments, consisting of four Irish hotels and two Spanish resorts, had notched up €200m in impairments since 2008.
Sale of State
Moves to raise €2bn or so by privatising semi-States went nowhere fast.
A special unit, NewEra, has been set up to look at the options. The salary of its director, Eileen Fitzpatrick, is under an omerta and Taoiseach Enda Kenny rejects comment that NewEra is another useless quango. Kenny ruled out a 'fire sale' of assets and said he wanted any proceeds to go towards job creation rather than debt repayment.
The EU/ IMF troika wants the State to raise €5bn through a State asset sale and for that to go towards debt reduction.
Senior lenders at the troubled telco rejected a €200m debt restructuring proposal put forward by majority shareholder STT.
The lenders now plan to press ahead with their own proposal, which would involve them taking full ownership of Eircom.
The sticking point was believed to be a clause in which STT was seeking to have €100m repaid within a year if Ireland left the euro.
Eircom has debt of €3.7bn and its restructuring saga seemed endless in 2011. STT withdrew its proposals before Christmas and its representatives on Eircom's board resigned. It's not clear whether the Singapore company has headed for the hills or if it will come back with a new offer. Poker faces all around.
Last year saw a few multimillion euro software company deals. Computer giant IBM bought Irish software firm Curam for an undisclosed sum. Curam provides government agencies with systems to administer social welfare and health services, with clients including the city of New York and five of Canada's 10 provinces.
CEO John Hearne said the company would have revenues of $100m (€120m) this year, suggesting a value of $150m. The deal means its software will be sold in 170 countries. A quiet grower over 20 years, it had resisted suitors for several years according to Hearne.
Defence giant BAe's €217m takeover of Paul Kerley's Norkom made Kerley circa €15m.
The businessman was ousted from One51, the investment company he founded and where he held the position of chief executive.
The Corkman's contract had been due to run until 2014. Its former chief financial officer, Alan Walsh, was appointed CEO. One51 showed losses of €280m for 2011 and refinanced €200m-worth of loans with six banks. The share price is now at about 20 per cent of its 2007 peak.
Lynch and his family lost a court battle with AIB over a €25m loan to buy property in Waterford.
This was the year the former billionaire lost control of his commercial empire.
Once worth a reputed €5bn, Quinn filed for bankruptcy, fast-tracking by opting to do it in Belfast instead of the Republic, the biggest order of its kind in either jurisdiction. It means he can get back to business in a year's time instead of 12 years -- provided the order is not overturned. The IBRC is challenging the bankruptcy move.
A record judgment of €1.7bn to IBRC was made against Quinn in the commercial court in November.
Property magnate Paddy McKillen fought Nama and escaped its clutches. The Supreme Court ruled that Nama's decision to take in McKillen's loans was invalid because it was made before the agency was officially established.
The court found against McKillen on other aspects of his case, but Nama ultimately decided not to acquire the Belfast man's loans. His companies owe more than €2bn to Nama banks.
McKillen is currently battling with the Barclay brothers over ownership of the Maybourne hotel group, with a court case due to begin in March.
The pharma group made quite a turnaround in 2011. First, the sale of its Athlone-based drug technology business to Alkermes in a deal worth $960m went a good way to reducing the €1bn-plus debt burden it had been carrying for several years. Elan will keep a 25 per cent stake in the business.
In spite of historic problems with side effects, sales of Elan's multiple sclerosis drug, Tysabri, grew 28 per cent.
Share price doubled during the year, having been in the doldrums for quite a while.
Tullow Oil record deal
Aidan Heavey's oil exploration company made a $2.9bn deal, selling stakes in its Ugandan project to Chinese operator CNOOC and Total of France.
The oil field is expected to yield over one billion barrels of oil. Tax disputes and local red tape threatened to derail the deal at various stages during the year.
The FTSE 100 giant wants to launch a $10bn investment to develop oil fields in the east African country.
It is also drilling close to Devil's Island on the east coast of South America to see if its Ghana oil field structure stretches the whole way across the Atlantic.