Wednesday 29 March 2017

Euro crisis will rumble on as buyout deals heat up

Business Editor Nick Webb gazes into his crystal ball to predict what may happen in the business world over the next 12 months

WE had our Weetabix last year when it came to forecasts, and we were bang on the money about the euro sovereign debt crisis spreading to Spain, Italy and France and how the bondholders would get off scot-free.

We pointed out how government economic growth projections of 2.75 per cent would "look quite silly" by the end of the year. We also nailed the commodities markets warning of a major correction in gold and silver prices.

Oh, and we were spot on about oil prices hitting $100 per barrel too. We said the residential property market would "remain dead" but that there would be major asset disposals in the UK and US. Asset sales from Derek Quinlan and the Treasury Holdings Battersea project would make headlines. And Michael Fingleton wouldn't give back his bonus.

Mind you, our predictions of a Tullow takeover and Aryzta's sale of its stake in Origin were wide of the mark. But that was then, this is now -- and what will 2012 bring for Irish business?

Euro sovereign debt crisis to get worse

Eurozone countries have to raise close to €1.3 trillion on bond markets in 2012. Pigs will fly before that happens.

The failure of Germany to get a bond auction away before Christmas was kind of scary, but it'll become a more common occurrence unless a new pan-European bond system is introduced. There'll be an awful lot more summits and the word 'veto' will be one of the most used words of 2012. Political fighting and faction building will become a key theme. . . it'll be just like the Eurovision song contest. And we'll get stiffed too.

Opinion polls ahead of a referendum on new EU rules will show that it's heading for a massive defeat until a last- minute offer to string out our debts for much longer at a lower interest rate is made by Merkel and Sarkozy. Governments will admit to making concrete plans for a disorderly break up of the euro. The crisis will still be running at Christmas 2012.

One51 to sell ICG stake

The departure of Philip Lynch from recycling and investment group One51 was one of the stories of the year. But it'll also lead to a major refocusing of the company under its new chief Alan Walsh.

Bringing debt down is probably one of the first things on his 'to do' list for 2012, and that means that its assets could be on the market. One51's 12.5 per cent stake in ICG, bought as part of the doomed Moonduster buyout approach, is likely to come up for sale during the year.

The stake is worth around €50m and could be dangled in front of Eamonn Rothwell before too long. ICG is almost debt-free and makes a shedload of cash, so it'll be an attractive bauble.

The year of Openet and other technology firms

The Barry Maloney-backed Openet Telecom will fend off a buyout approach from a major player and announce plans to list on Nasdaq.

It'll be the first Irish technology flotation in almost a decade. Liam Casey's PCH will float in Hong Kong. After the takeovers of Cartrawler, Curam, Norkom and Newbay last year, the pace of buyouts will continue with deals for Globoforce, Lincor and Populis all being approached. Former Riverdeep founder Pat McDonagh will blow us away with some genius new idea.

Bit of the economy

will go blue

Ireland's competitiveness will improve. . . as we'll all be getting paid in potatoes instead of hard currency. But fears over the break-up of the euro will see foreign direct investment wobble as multinationals hold off investments until certainty returns.

The global slowdown, exacerbated by a Chinese wobble and major hiccups in Brazil and India, will hit some exports. Things won't be helped by the sheer volume of major Irish-produced blockbuster drugs going off patent and being replaced by cheaper generic drugs made in India and eastern Europe.

Ireland will go back into technical recession, but we'll be better prepared for it. Some parts of the economy will have record years -- like the technology and food sectors, which will go gangbusters in 2012. Queues outside agriculture colleges and green wellyboot shops will become the norm.

The Government won't have any wriggle room and the Croke Park Agreement and public sector pay will be the key domestic issue of the year. Unemployment will remain above 14 per cent.

But the one big plus will be the Irish banks. While banks across Europe are splattered on the pavement because of failed rights issues, debt write-offs and tumbling asset values, Irish banks will assume an air of superiority because they've been recapitalised to the hilt. So the issue of bonuses will come to the fore again.

NTR to break up

NTR, the investment company controlled by the Roche family, will sell its assets and divvy up the cash to shareholders. Toll roads, green energy and other major assets will be sold to a motley crew of private equity firms and other buyers. A big fat cheque will go to the Roche family and other well-heeled backers of the company. They might just use it to land a massive, massive deal.

Property prices

While the euro crisis rumbles on, there'll be precious little happening in the residential property market.

More homes on Ailesbury Road or in the posh redbrick districts in Dublin 4 and 6 will be sold. But, nationwide, there'll be very little activity in the estate agents.

Nama may bring in the diggers and bulldozers to knock down a ghost estate in Leitrim or Longford. It'll be worldwide news as cows start to graze on the site.

More plum assets will be sold by Nama -- mainly in the UK and US. The Battersea Power Station will top the list. A few smaller deals in Dublin may improve the mood and there'll be an approach to buy a major shopping centre for a knock-down price.

Aer Lingus stake to

be sold to Etihad

The sale of the Government's stake in Aer Lingus will be offloaded to Etihad for half nothing. Ryanair will cause mayhem as part of the process.

O'Leary may look at some kind of wizard deal to use Ryanair's cash mountain. Could he buy an airport or get into oil refineries? The thought of returning cash to shareholders wrecks his Cheltenham. . . although he still lands five races with the biggest raiding party to leave these shores since Niall of the Nine Hostages.

State asset sales

to be fudged

The sale of Irish Life will be re-activated in midsummer, with companies looking to pay less than €1bn. It'll be painful but we'll take it, despite the offer being lower than it was before Christmas.

But workers at semi-States such as ESB and Bord Gais may be spared the horrors of the private sector as a ridiculously complex proposed ownership structure and licensing deal scares off potential buyers. One-nil to the beardies in Government.

Fingleton not to

give back his bonus

Former Irish Nationwide boss Michael Fingleton will come under pressure to give back his €1m bonus. But he won't budge. . . even after being doorstepped in the airport by RTE after returning from his trip to the sun.

Former Financial Regulator Patrick Neary will come back into focus as his role in the collapse of the banking sector is revisited.

Former BoI boss Brian Goggin will score a hole in one and win a charity classic at Foxrock Golf Club. Former AIB chief Eugene Sheehy will get a first at Trinity and look to do some post-grad work.

The Government will be praying that Sean FitzPatrick will be arrested in the week running up to the euro referendum and again in December ahead of the Budget. . . and maybe ahead of any other tough Government decisions.

Paddy Power to be bought by Caesars... or vice versa

The ascent of Paddy Power will continue as it moves into more new markets. There'll be a big deal on the cards. Caesars Entertainment Corporation (formerly Harrahs) may start to have a bit of a poke around the Irish company. Or if the share price continues to soar, Paddy Power may have a go itself.

Resources companies

on the block

The year will kick off with a deal to buy John Craven's €600m-valued Cove Energy as the east coast of Africa becomes incredibly sexy for investors, especially for big Chinese and Indian firms.

Aidan Heavey's Tullow Oil will once again be dogged by takeover chatter, with Michael Carville's Kenmare Resources also coming on the radar.

The return of

some old faces

Some of the casualties of the meltdown will return fronting new enterprises -- with varying degrees of success or opprobrium.

Former Ulster Bank boss Cormac McCarthy will front a buyout of bank loan assets with private equity group Oaktree, while former Riverdeep chief Barry O'Callaghan will also emerge as a backer of a spectacularly shrewd transaction. There'll be quite a stink when some former Irish bank insiders end up buying loads and loads of stuff.

Sunday Independent

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