Thursday 25 April 2019

Roche family crosses the bridge to rise again to billionaire class

THIS week's deal between the Government and NTR to buy out the Westlink for ?600m will make the fabulously wealthy Roche family even richer.

Following the deal, the family are now comfortably in the billionaire class.

The rise, fall and rise again of the Roche family is one of the great sagas of modern Irish business history. Tom Roche Senior was one of the giants of Irish business, founding CRH, Ireland's largest industrial company.

Born in 1916, he was forced to leave school when his civil servant father died in 1932.

The death of his father triggered a rapid move down in the world, with the family moving from the swish Dublin suburb of Sandymount to the more egalitarian Inchicore. While his mother, Kathleen, opened a small sweetshop, Roche, aged just 16, bought a one-and-a-half-ton truck and started up a coal and sand business with his brother, Donal.

The fledgling business grew rapidly and by 1944, Tom and Donal Roche had done well enough to buy a gravel business, Castle Sand and Gravel.

Tom was managing director of the company, which went public as Roadstone in 1949, and Donal was his assistant. The flotation was not a success, with underwriter ICC being left with 70pc of the shares. However, the State-owned investment bank kept its nerve and later sold the shares at a huge profit.

As a quoted company, Roadstone grew rapidly as it bought up many of its competitors to become the largest building-materials company in the country.

In the process, it became the largest customer of Irish Cement, then the monopoly producer of cement in Ireland. Irish Cement, which had been founded in 1936 to manufacture cement in the newly-independent Irish State, always reckoned it was a cut above the Roadstone upstarts.

However, Irish Cement's industrial relations were more than a little chaotic with several strikes leaving the country without cement, something which hit Roadstone particularly hard.

Following the three-month 1970 cement strike, Tom Roche had had enough. He launched his most audacious move yet when he bid for Irish Cement. To add insult to injury, Roadstone, which had virtually no cash, was offering to pay for its target with new Roadstone shares.

Not surprisingly, given the poor relations between the two companies and the lack of a cash offer, the Roadstone move sparked a rival bid for Irish Cement from UK company Readymix.

Unfortunately for Readymix, this was in the days before free markets and Tom Roche had the inside track. The State-owned Irish Life, which had 10pc shareholdings in both Roadstone and Irish Cement, was prevailed upon to do its "patriotic" duty and Cement Roadstone Holdings (now known as CRH) was born.

While the deal was structured as a "merger", it was in reality a Roadstone takeover of Irish Cement. Tom Roche Senior took over as chairman in 1971 following the death of CRH's first chairman, former Taoiseach Sean Lemass, while all of CRH's chief executives until the appointment of current boss Liam O'Mahony in 2000 came from the Roadstone side of the business.

This made for some interesting board meetings in the early days, with an apparently true story being told of how one CRH director hurled a crystal ashtray at a fellow director who came from the "other" side.

If Tom Roche Senior had done no more than create CRH, his place in the Irish business Hall of Fame would be secure - but it was what he did after his retirement as CRH chairman in 1974 which ultimately ensured that the Roche family would become one of the major Irish business dynasties.

Things didn't start off too well. The elder Roche invested most of his wealth in Bula. Bula was headed up by his son-in-law, Michael Wymes, and had stolen a march on its rival, Tara Mines, by snapping up a share of the Navan lead and zinc deposit.

Then it all went horribly wrong and Bula eventually went bust. The result was that by the late 1970s, in his early sixties and after a lifetime's hard work, Tom Roche Senior was as good as broke.

Such a blow would have crushed a lesser man - but for Roche, it was merely the spur to start all over again. The result was the Eastlink toll bridge, which was built in 1984. It was Ireland's first toll bridge and cost £8m (?10.16m) to build, money which Roche didn't have at the time. Instead, he put up just £500,000 (?635,000), with the rest of the money coming from bank loans.

When the first Westlink was built in 1990, Roche was also able to get others to put up the money. He sold 52pc of his company, National Toll Roads (NTR), to a number of financial institutions for £8m (£10.16m) and borrowed the rest of the £27m (?34.3m) cost, which we now know also included a 3.2km stretch of the M50 from the Westlink to the N3 exit as well as the bridge itself.

In other words, the Roches had got nearly half of a company with bridges and roads that had cost almost ?45m to build for a cash outlay of just ?635,000. By the time it came to build the second Westlink bridge, which opened in September 2003, NTR was able to borrow the entire ?23m cost without the Roches or any of its other shareholders having to put their hands in their pockets. Tom Roche Senior died in 1999 and the company is now chaired by his son Tom Roche Junior.

While the Westlink was a slow starter - initial traffic volumes were just 3,000 vehicles a day - the completion of the M50 soon changed all that. The number of cars and trucks now passing through the Westlink toll barriers now frequently exceeds 100,000 per day.

The result has been that the Westlink has become a prodigious cash cow for NTR. Its tolling business, principally the Westlink and Eastlink, racked up operating profits of ?33m for the 15 months to the end of March 2006. NTR is now worth ?1.43bn, valuing the 44pc Roche family stake at over ?630m. Over the past five years, NTR has paid its shareholders more than ?36m in dividends, of which about ?15m went to Tom Roche Junior.

For most families, that would be more than enough to be getting on with. Not if your name is Tom Roche Junior.

He is married to Anne, a daughter of hotelier PV Doyle. While her sisters Bernie Gallagher and Eileen Monahan have never been shy about appearing in public, Anne Roche prefers a lower profile, and it is Tom Roche who sits on her behalf on the Jurys Doyle board.

Ann Roche and her two sisters shared ?115m in cash and a 25pc stake between them when Doyle Hotels was taken over by Jurys in 1999. Then the three sisters took Jurys Doyle private in a ?1.3bn deal in 2005.

However, the ?370m released by the sale of the Jurys and Berkeley Court Hotels, the ?50m from the Montrose and the ?150m-?200m likely to be raised from the sale of the Burlington Hotel have left the three sisters with 30pc each of a company worth well over ?1bn.

Add it all up and Mr and Mrs Tom Roche Junior's combined net worth comfortably exceeds ?1bn.

Unfortunately for Tom Roche Junior and NTR, the Westlink was in danger of becoming a victim of its own success. While the huge traffic volumes generated enormous toll revenues, the toll barriers were also at least partially responsible for chronic traffic congestion on the M50. With a general election coming up, NTR found itself in the eye of the storm as public anger at rising tolls and tailbacks mounted.

The challenge for Tom Roche Junior and NTR was to sell the Westlink back to the State for the best possible price.

This week's deal, which guarantees NTR ?50m a year, index-linked, for the next 12 years, shows that Roche and his chief executive, Jim Barry, played their hand to perfection. The fortunes of the Roche dynasty are secure for at least another generation.

Also in Business