Thursday 19 January 2017

The triumphs and disasters that are waiting to meet us in 2011

Takeovers and sell-offs will dominate while our property and job markets splutter back to life in the coming year

Published 02/01/2011 | 05:00

AIB needed to raise €5.2bn to satisfy new regulatory requirements. There was no chance of that happening, so it had to be nationalised. Photo: Damien Eagers
AIB needed to raise €5.2bn to satisfy new regulatory requirements. There was no chance of that happening, so it had to be nationalised. Photo: Damien Eagers

What will 2011 bring for some of the biggest and best known names in business? Will there be further carnage and teeth gnashing or will the green shoots of recovery start to take root.

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We predicted carnage for McInerney, Boundary and Barry O'Callaghan's EMPG 12 months ago, along with nailing property prices and the nuclear winter for banks and developers. How will we do in 2011? Nick Webb looks into the crystal ball to see what could be in store for some of the top players in business for 2011.

ARYZTA TO SELL OFF STAKE IN ORIGIN

Owen Killian's, below, debt-fuelled splurge to buy new businesses for Aryzta will probably continue for some time. But non-core assets such as the croissant company's 71.4 per cent stake in €420m valued fertiliser and animal feed business Origin Enterprises are at risk. The stake harks back to the good old days of IAWS, when the company was run by people in flat caps who knew one end of a pig from another, rather than the slick corporate types now in the boardroom. The disposal will net Aryzta a cool €300m before costs.

Banks to keep blowing up

The regulators and Central Bankers believe that we don't really need to get too excited about the possibilities of defaulting mortgages blasting a big hole in the crippled banks. Pull the other one.

With unemployment stuck at 13.5 per cent, forecasts that the banks will take a modest five per cent hit on their mortgage book is straight out of loo-la land. And that's before credit cards. And personal and car loans. And we haven't even gone into corporate loans, especially ones to the small business sector, which has seen the rise in company failures jump 17 per cent in 2010.

AIB needed to raise €5.2bn to satisfy new regulatory requirements. There was no chance of that happening, so it had to be nationalised. Bank of Ireland's €2.2bn hurdle is also looking far too steep, so the State will own most of that too. Efforts to offload the banks will focus on slimming loan books and selling off parcels of debt. Will John Bruton's, bottom left, recent trade mission to the Gulf have smoked out any oil rich sovereign wealth funds willing to risk a few bob on Ireland? Wilbur Ross and the Cardinal Group will get their hands on EBS with the rump of Anglo and Irish Nationwide plonked into a new entity.

Sovereign debt crisis to roll on

Portugal will tap up the IMF/EU bailout fund... and get a better deal than us. Speculators will zone in on Spain, Italy and Belgium with bond yields rising sharply. But when France comes into the frame, things will really pick up speed. Germany's reluctance to finance its spendthrift European partners will become even more vocal.

However, some form of eurozone bond will be unveiled with a device to force bondholders to share some pain. Ireland's existing bondholders won't be burnt but future lenders to the country will charge through the nose. And we're complaining about a near six per cent interest rate now! The sovereign debt crisis will also spread east with German banks getting increasingly worried about the accession states. A German lender will have to be bailed out by the state.

mixed fortunes for commodities boom

There's no doubt that gold is looking like a big fat bubble. It will pop. But will it be in 2011 or is there a bit more in the bull run. Copper is looking very toppy and silver surges in 2010 may lead to some sell off. If growth continues, then we could see oil prices head back towards the $100 levels. But if the banking sector explodes over huge exposures to the overheating property sector then oil could take a battering.

Grafton to buy UK player

Michael Chadwick may be getting worried. He probably should have taken Grafton private in 2007 as the share price tanked. The DIY and builders supply firm is in rude health again after facing the demons of the recession. But there's precious little in the way of organic growth on the cards here. The market will shrink if anything, as consumer confidence struggles and successive budgets destroy spending power. Chadwick is bound to be looking at further expansion in the UK. There are probably plenty of boring little bolt-on deals but there's a feeling that he might do something big. Could he look at buying debt-laden Focus?

C&C to be bought out

SAB Miller or Canadian outfit Moulson Coors are considered to be potential predators if C&C comes into play.

Government to sell Aer Lingus stake

In 2007, when Ryanair launched its first bid for Aer Lingus, the Government's stake was worth more than €350m. Now it's worth closer to €150m. But expect the stake to be offloaded. ABR -- Anyone But Ryanair. Some form of a tie up with Lufthansa's BMI looks like a good bet at this stage but KLM-Air France, BA or even a private equity player could also be in the shake out. The windfall might even pay to fund about four days of the Government deficit.

sex scandal in boardroom Ireland

It's been a long time since anything naughty happened in Ireland's boardrooms but 2011 will see explosive allegations made against one of the country's top executives. There'll be a high profile resignation and talk of a massive lawsuit... which will of course be settled out of court.

Abbey to be taken private

The Gallagher family own more than 41 per cent of home building group Abbey. The company had about €45m sitting around in cash. The whole company is valued at just €120m. This screams take private. Charlie Gallagher has got to be looking at pressing the button on a deal. But will the banks fund any deal? If they don't, private equity outfits might just step in. Oaktree Capital saw enough of a potential return in bombed out homebuilder McInerney to offer to write a big fat cheque.

property gets a slight heartbeat again

The vulture funds are here. David Bonderman's Texas Pacific Group has hooked up with Stephen Vernon's Green Property with a plan to spend €900m on cheap property assets in Ireland and the UK.

A €120m deal to buy retail property in Dublin was mothballed with the IMF arrival. This may be reheated in coming months. Vast private equity group Carlyle -- also in the running for the EBS -- is also thought to be looking around.

Nama will come under increasing pressure to start offloading some of its €80bn in property loans over the next year. However, while there may be smaller transactions in Ireland, it is more likely to see major asset disposals in the UK and US.

Treasury Holdings' Battersea Power Station project is likely to hit the headlines again, with Derek Quinlan, above, selling some big, big trophy assets. The residential property market will remain dead.

Tullow takeover

Former accountant Aidan Heavey may be able to buy as many Lamborghinis as he wants in 2011. He could have a new one every day if his €13bn oil company Tullow gets bought out. While Korean player KNOC bought Dana Petroleum recently, Tullow's suitors are more likely to be Italy's Eni, Total or one of the major Chinese oil firms .

The economy splutters

A good time to be a multinational as costs continue to fall. But a pretty awful time for everyone else. The FG-led Government will try to renegotiate the bailout and after several weeks of huffing and puffing, we'll all be about two cents better off. The grand plans to reform the public sector will be derailed before being deferred. Unemployment won't budge and emigration will continue to rise. On the plus side, Dublin Airport authority won't look like such berks for building the white elephant at T2, above.

The government growth figures contained in the four-year plan will look quite silly by the end of the year with spin doctors complaining that a misprint meant a decimal point was in the wrong place. Instead of a forecast of 2.75 per cent...we obviously meant 0.275 per cent. But growth is growth, so we can't complain. Otherwise there could be an election. Another one after the one that will see Fianna Fail obliterated in the Spring.

Michael Fingleton not to give back his e1m bonus

The former Irish Nationwide boss probably won't be giving back the €1m bonus as he continues to fight court cases over a Cavan property deal that went bad with major debts.

But Mr Fingleton, above, won't be alone. Former Financial Regulator Patrick Neary probably won't be offering to return his €630,000 golden handshake or the €143,000 public sector pension. Former B of I boss Brian Goggin may not be queueing up outside the Department of Finance offering to give up his €650,000 per year pension, with Eugene Sheehy equally unlikely to show such largesse.

Sunday Independent

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