Interview: The long road to Toronto for IPL
IPL Plastics boss Alan Walsh finally managed to list the company formerly known as One51
For Alan Walsh, the ringing of the bell at the Canadian listing of IPL Plastics - the Dublin headquartered company formerly known as One51 - was a particularly sweet sound. That's because One51 has experienced one of the most difficult roads to a stock market listing of any Irish company.
One51 founder Philip Lynch first mooted the idea of a listing back in 2007, while a more recent plan was shelved in 2016 after one of its highest-profile former investors, the billionaire businessman Dermot Desmond, failed to endorse the plan.
It has also been a rocky road for ordinary shareholders, most of whom could never have envisaged that the company, with its roots in the Irish Co-Operative Agricultural Society, would end up being a listed entity in Toronto.
"So many people though this day would never happen," says Walsh.
And in recent weeks, with the valuation of peer companies under pressure, there was some nervousness about the listing.
Was there a moment when Walsh felt that the IPO should be pulled? "No," he says firmly, "Not one."
"The important thing was to get it done and move on."
This did not mean getting it away at any price, he insists, although it did come in at the lower end of the range. Walsh says the company still compares well with the peers it was being benchmarked against.
It was a complicated listing, with over 2,000 existing Irish shareholders and two large Canadian shareholders, Caisse de depot et placement du Quebec (CDPQ) and Fonds de Solidarite being diluted. There were some additional mechanisms needed to keep shareholders and underwriters happy, such as a lock-up for the Irish shares for six months.
"Our challenge was to make the IPO big enough to get people interested, but not overly dilutive from an existing shareholder perspective," says Walsh. "Investors like very simple things and when you start explaining about lock-ups and buyback programmes you could see people's eyes glossing over and they were thinking 'come back to me when all this is sorted out'."
However, one of the IPO lunches in Canada was one of the biggest such events seen in Toronto, Walsh says, due in part to IPL's history there. IPL was previously listed in Canada and so the name still resonates with the investment community. "But it's a very different animal than IPL was eight years ago," Walsh points out.
In the US and Europe, the response was more muted, however, as the size of the listing was too small for many of the institutional investors.
In the end, 92pc of the allocation went to Canadian institutions and while there are retail investors, Walsh said he does not know if many of them were Irish. "We've ended up with a lot of blue chip institutions," he says.
At the moment, 74pc of its revenue comes from North America. Walsh said that the business needs production capacity in continental Europe. "You would certainly like to deal with that, have some meaningful presence in continental Europe. There are lots of opportunities in North America as well.
"But you won't see that level of weighting in North America going forward."
There have also been questions about just how Irish the company will be in the future, with reports in Canada incorrectly claiming that the head office would be based there. Walsh said it remains in Dublin. However, he travels extensively to the group's 14 plants around the world and only 22 people are now based in the office, compared with 55 when he first took over as chief executive.
Walsh will have to report on the business quarterly and there will be quite a bit of investor relations work, such as capital markets day, so an office in Montreal will be regular stop for Walsh. "But Dublin is what it is, it's not going anywhere."
Walsh grew up in Athy, Co Kildare, the youngest in a family of seven. His father was a mechanic and his mother worked in the home.
"I always did well academically and wanted to be an actuary. Thankfully, I didn't get that subject in college to be honest," he says.
He studied commerce and French in UCD, which has turned out to be fortuitous given his relationship with Canada. After college he joined accountancy firm KPMG, and then worked with Mathesons. He was working with insurance company Axis, when a friend told him that One51, then headed by businessman Philip Lynch, was looking for a person to work on tax and accounting.
"It a was very high-profile organisation in 2006 and 2007," he says.
What he didn't realise was that the highly acquisitive company would soon be hitting the headlines for all the wrong reasons.
Back then, One51 was already talking about listing the business. "It was all fine for a while, but then the wheels started to fall off the chariot in 2008," he recalls.
As the economic crisis hit and One51's shares began to suffer on the limited grey market - which is a trading system among some stockbroker firms - attention turned to Lynch. His very generous pay was scrutinised as much as the wisdom of his strategy.
Walsh took the job of CFO in 2009 although he adds "maybe I should have run for the hills".
He says he and Lynch ended up in "a very confrontational relationship". Shareholders continued to pile pressure on Lynch and when he was eventually ousted in 2011, Walsh stepped into his shoes. The share price was on the floor. One51's portfolio was a ragbag of investments at a time when the market was seeking out simple business cases. Vulture funds were circling and banks were recoiling from risk.
Many One51 shareholders doubted that Walsh, then in his mid-30s, could do much to save the business. However, he began to sell of the group's varied investments and slowly shaped the business into an important player in the rigid plastics sector.
It was a far cry from the racy days under Lynch when he was on his ravenous acquisition trail, but Walsh was building a solid business that investors could understand.
Walsh sold off a large stake in ICG at a price he now describes as "a sickener", but at the time he had no choice given the pressure he was under from the company's lenders.
He also sold the metals recycling business back to its original owners. It is an extremely challenging industry, one not well suited to corporate norms.
Ironically, the metals recycling business and its complexities kept the vulture funds at bay, as well as the banks which felt that business was a bigger bite than they were willing to chew.
One51 also exited NTR, headed by Tom Roche. Like One51, it was on the grey market and extricating One51 from the share register was no easy task. But getting cash out of that business is arguably what saved One51 and set it on its current path.
With those sales executed, Walsh seemed to have steadied the ship. It invested in Canadian company IPL in 2015, taking a €201m majority stake. It was a transformational deal but few knew just how transformational it would be.
One51 continued to a magnet for controversy. Dermot Desmond became an investor and a planned IPO did not go ahead in 2016 after Desmond failed to support the listing plan.
CapVest, headed by Irishman Seamus Fitzpatrick also made a couple of attempts to buy out the business, the most recent one being late last year. The key to a deal would be getting the Canadian shareholders on board, but talks ended in November 2017.
Over the years, it must have been difficult to focus on running the company rather than that various highly-publicised controversies which beset One51.
"It's hard," says Walsh. "Yes, you are trying to run the company, but the reality is that is can be difficult."
After the IPO was pulled in 2016, Walsh considered leaving the company, but he said that ultimately it was not in his nature to walk away.
When Desmond sold his stake to the Canadian shareholders, Walsh was free to refocus on a listing. The company originally planned a dual listing, with one in Dublin or London as well as Toronto. However plans for this were dropped earlier this year. This was in part due to the woes of UK-based peer RPC, with concerns that the Irish company's valuation could be dragged down if there was a second listing on this side of the Atlantic.
"In hindsight, if we had decided to do a Dublin/London listing, it probably wouldn't have gone ahead because RPC's multiple has fallen so much in the last few weeks." Walsh says he thinks "a few" Irish shareholders would prefer a local listing, but he believes that Toronto listing has been the best option.
The road to the listing was a technically complicated one due in part to the detailed agreement One51 had with IPL and the Canadian shareholders, as well as the Irish investors.
The lock-up has received some criticism - it means that Irish shareholders cannot trade on the TSX for six months. But a CA$50m (€32.5bn) buyback gave them a chance to exit on the listing date and shareholders with 5pc of outstanding shares chose to cash out.
Walsh took that as indicating most shareholders decided they 'ain't going anywhere'. Around 42pc of the company continues to be owned by Irish shareholders, many of them co-ops and wealthy individuals. Walsh says it's up to the shareholders to decide how Irish it remains.
"They now have the option of sitting there and hopefully participating in the continuing growth and development of the company. They have options to sell their shares, they didn't have that in the grey market," he says. "The question is, what do they want to do with their shareholdings going forward?"
Looking ahead, Walsh continues to have big ambitions for the firm. "Is it possible to double the size of the company from where it's at over the next couple of years? It is, with organic growth and a few acquisitions," he says.
Sunday Indo Business