Tuesday 25 April 2017

Messy Mercantile pub chain row spills out into courts

Well-known publican Frank Gleeson is in a bitter High Court dispute with his business partners, writes Gavin McLoughlin

On one side is well-known Dublin publican Frank Gleeson, who merged his Mercantile Group with the Capital Bars group at this time last year. The new business encompassed some of the capital’s best-known pubs and restaurants, including Cafe en Seine, the Mercantile and The George.
Gavin McLoughlin

Gavin McLoughlin

In February 2016, a new force in the Irish pubs scene was announced, bringing together some of Dublin's most glamorous and best-known pubs, including The George and Cafe en Seine. Almost exactly a year later, the group is at the centre of a rip-roaring legal dispute.

On one side is well-known Dublin publican Frank Gleeson, who merged his Mercantile Group with the Capital Bars group at this time last year. The new business encompassed some of the capital's best-known pubs and restaurants, including Cafe en Seine, the Mercantile and The George. Gleeson was made chief executive of the new entity. At the time, he made a statement full of hope and ambition: "This is a transformational deal for our businesses and will position the Mercantile Group at the forefront of the sector in Dublin. We have ambitious plans to grow the business further both in Dublin and internationally and we are looking forward to a very exciting period ahead."

Excitement followed, but it is unlikely to be what he had in mind. Gleeson would be put on gardening leave within a year and details of a bitter row aired in the courts last week.

Gleeson's adversaries include Danu Partners, the Irish investment firm run by the co-founders of Setanta Sports, Leonard Ryan, Mark O'Meara, and Michael O'Rourke. It, along with Gleeson and a firm called JT Magen (Capital Bars) LLC, are the shareholders in Ardan Advisory - the company behind the newly merged Mercantile entity.

JT Magen is an offshoot of EMI-MR Investments - a so-called "family office" which invests money on behalf of two families, the Breslins and the Regans.

The High Court heard that EMI was looking for a judgment of €4.6m against Gleeson.

The court heard the company had given Gleeson loans to buy the Bottom of the Hill pub in Finglas and Gleesons in Mulhuddart, as well as to enable him purchase shares and to pay legacy trade creditors.

The dispute stretches right back to the newly-merged entity's earliest days, with both sides giving very different versions of how the relationship unravelled.

According to Gleeson, he was an oppressed minority shareholder and he plans issuing proceedings in this regard.

He claims that immediately after the merger was completed, his rivals began to flex their muscles by having the then finance director Peter Feeley removed, claiming further that a named representative of his rivals wanted to have a high-profile former banker appointed to the role, something that is strongly denied by the other side.

Gleeson claims the majority shareholders had unrealistic expectations about the EBITDA (earnings before interest, tax, depreciation and amortisation), and that they started issuing directions to staff of the various Mercantile outlets - which Gleeson says should have come from him in his role as chief executive.

He also says they didn't deliver on promised capital-expenditure commitments. A person familiar with the matter said the company had committed around €4m in capital expenditure. By November, Gleeson claims he was told he would be fired as chief executive and that talks about buying him out of the business had started. He says favourable terms could not be agreed and that he was then placed on gardening leave, with his Mercantile Group email address suspended without notice.

The other side were deeply unhappy that details of the row reached the media. In a statement issued to the Sunday Independent they said: "We are aware of allegations contained in a letter written by legal representatives of Frank Gleeson. The letter contains a number of untrue allegations which in some cases are defamatory.

"We vigorously contest the claims made in the letter, and will make our case in the proper forum of the court when a sworn affidavit is received."

They said any suggestion that the former banker was considered for the role of CFO was "demonstrably false and without foundation", and that no suggestion was ever made that the banker might become involved with the group.

They claim Gleeson hasn't abided by agreements that were made as part of the merger. One was a service agreement in the context of his role as Mercantile's group chief executive. It says that the agreements relating to his job are separate to his shareholding in the company.

The merger, they say, came about because Gleeson was exposed to Bank of Ireland to the tune of around €24m - and the bank required his loans to be discharged by the middle of last year. They say Gleeson approached Grant Thornton for advice.

The other shareholders were also Grant Thornton clients and the combination of Mercantile and the Capital Group emerged as an attractive proposition. Gleeson's loans to Bank of Ireland were discharged as part of the deal, they say.

The other shareholders claim there's no question of shareholder oppression and that all the actions they have taken have been in the company's best interests.

They say they provided significant capital expenditure, citing major refurbishments of Farrier and Draper on Dublin's South William St, and Pichet restaurant on Trinity Street, which they say ran significantly over budget under Gleeson's management, and that their expectations for EBITDA were based largely on projections Gleeson and Feeley had provided.

Despite placing Gleeson on gardening leave via the terms of his contract, EMI-MR claim that Gleeson continued to instruct staff to report to him and ran up a large bill for food and drink on one occasion just after Christmas.

They say the EMI-MR loans are contractual obligations agreed prior to Gleeson taking a shareholding in Ardan and are a separate matter, and that his email address - which they call an asset of the company - was suspended because Gleeson was on gardening leave and should have had no need of it.

What happens now? Affidavits were due to be exchanged over the course of last week and the coming week, with Mr Justice Brian McGovern saying he would then give instructions as to how the case should proceed from here.

Unless there's a settlement the courts will be asked to rule on whether Gleeson has to pay up on the loans.

Gleeson's barrister Rossa Fanning SC told the court he would be raising an issue around abuse of process, prompting Aidan Redmond SC - for EMI-MR - to ask the court for such a serious allegation to be placed in writing.

Redmond told the court that separate proceedings would be issued on the matter of whether Gleeson was an oppressed shareholder.

One thing's for certain, it seems - these parties won't be working together ever again.

Restaurants and pubs at the centre of the Dispute

The merger in February 2016 meant Gleeson and his rivals would control some of Dublin's best-known pubs and restaurants.

Perhaps the most high profile is The George, the country's most famous gay bar. Also in the group is Whelan's pub on Wexford Street, which is an institution for fans for live music where acts including Jeff Buckley, Nick Cave & the Bad Seeds, Ed Sheeran, Hozier, and Damien Rice have played.

The Mercantile Group takes its name from the Mercantile pub on Dame Street - the place where Leopold Bloom worked in James Joyce's Ulysses.

Cafe en Seine, on Dawson Street, is also part of the group. The pub is housed in a three-storey building where French prisoners of war were kept after the 1798 rebellion, according to the bar's website.

Restaurants in the mix include Pichet, previously best-known for its association with MasterChef Ireland judge Nick Munier. Munier left the restaurant in 2014 after a dispute with Gleeson and others. Another restaurant is Farrier & Draper - which also includes a bar - located in a Georgian townhouse on the ultra-trendy South William Street. It was opened not long after the completion of the merger.

A third eatery in the group is The Green Hen, a French bistro located on Exchequer Street. On Wexford Street is the Asian restaurant and cocktail bar Opium.

Le Petit Parisien - a French cafe on Wicklow Street - is owned by the Mercantile Group, as is Soder + Ko, a restaurant on South Great George's Street that is closed for renovation work but serves "a creative blend of Scandinavian and Asian-inspired quality drink and food", according to its website.

Other properties in the group include the East Side Tavern and the South William Bar.

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