Business Irish

Wednesday 21 February 2018

Sun sets on the fruit king

McCann's determination built his family's small fruit business into western Europe's largest fresh-produce distributor

The death this week of former Fyffes' chairman and chief executive Neil McCann brings down the final curtain on the remarkable 60-year career of one of Ireland's most successful businessmen.

McCann, known as "Neily" to friend and foe alike, was the guiding light behind the transformation of a small, Dundalk, Co Louth-based fruit-and-vegetable distribution business into what was, at its peak, the largest fresh-produce distributor in western Europe.

Along the way, he was centrally involved in two epic legal battles, several major takeovers and a small war. The one thing Neily could never be accused of was being dull.

In his later years, McCann cultivated an avuncular air, always charming with a witty word for everyone.

Tough business

Those who knew him well weren't fooled. In a tough business, Neily was tougher than most. "Neily would go through you sooner than go around you," recalls someone who knew him in the early days.

Neil McCann was born in 1924 in Dundalk. He was educated at the local St Mary's College and at Castleknock College on the outskirts of Dublin.

In his youth, he was a top-class, middle-distance runner and retained his athletic physique throughout his life.

In 1948, McCann joined the family firm, Charles McCann & Sons. Founded in 1902, it was a small, Dundalk-based, fruit-and-vegetable firm, one of hundreds in the country at the time.

Six years later, he took over as chief executive following the death of his father.

Growth focus

The difference between the young McCann and most of his competitors in the mid-1950s was that, while they were content to continue to operate on a small scale, he was determined to grow the business that he had inherited into something much, much bigger.

Over the next three decades, McCann engineered a series of mergers and takeovers that gradually elevated his company into Ireland's largest fruit-and-vegetable distributor.

So successful was McCann that, in 1980, venture capital firm DCC took a 20pc stake in his company, by then renamed Fruit Importers of Ireland (FII).

The following year, FII floated on the Stock Exchange. Neily used the currency created by FII's Stock Exchange quotation to good effect.

From a turnover of £41.2m (€52.3m) and pre-tax profits of £2.4m (€3m) in 1982, its first full year on the Stock Exchange, it had grown to a turnover of £81.6m (€103.6m) and pre-tax profits of £4m (€5.1m) by 1985.

Then in 1986 came the deal that catapulted FII into the big time when it paid the equivalent of £27m (€34.3m) for British banana importer Fyffes to American company Chiquita.

As a result of the deal, FII, which was soon renamed Fyffes, moved from being merely the biggest fruit-and-vegetable distributor in Ireland to being the second-largest player in the UK market also.

The result was a further quantum leap in the size of the company, with turnover hitting £293m and pre-tax profits £19m by 1988.

However, it was not the Fyffes deal but his involvement in another 1980s takeover that moved Neil McCann out of the business pages and on to the front page.

By the mid-1980s, Irish Distillers was drifting. Created in 1966 as the monopoly producer of Irish whiskey, it had been unable to compete with the big international spirits manufacturers in its attempts to propel Irish whiskey into the big time.

When, in 1987, its largest shareholder, Canadian spirits producer Seagram, dumped its 13.8pc shareholding, Neil McCann was ready to pounce.

Seagram stake

By acquiring the Seagram stake and the shares of other disillusioned investors, Fyffes built up a 20pc shareholding in Irish Distillers.

This made it that company's largest shareholder and put it in pole position to profit from the looming takeover battle.

By the time, after a lengthy court battle, Irish Distillers was finally sold to Pernod Ricard, in November 1988; Fyffes had made a £25m (€31.7m) profit on its investment.

Following the Fyffes' purchase, Chiquita, which was controlled by the Lindner family, took a large minority stake in the Irish company.

Despite talk of everlasting friendship between the two families at the time of the 1986 deal, relations between the Lindners and the McCanns rapidly soured.

The Lindners under-estimated McCann and within two years Chiquita had sold its shares.

However, when Fyffes attempted to establish its own Central American banana-growing business and then to enter Chiquita's backyard by distributing its bananas in the US, it was the Irish company that received a bloody nose.

While business journalists often use terms such as "war" loosely, the banana war Fyffes fought with Chiquita in Central America was, by all accounts, very much the real thing.

When, in 2001, Chiquita filed for Chapter 11 bankruptcy protection, there were many who thought that Fyffes would launch a takeover of its great rival. With large cash balances on its balance sheet, Fyffes could certainly have funded a Chiquita acquisition.

So why did McCann, never one to shirk a challenge in his earlier days, pass on the opportunity to bid for Chiquita?

At almost 80 years of age, his health had finally begun to fail. In addition, he was distracted by matters closer to home.

Bizarre as it may now seem, Fyffes briefly became a beneficiary of the internet mania in 1999 and 2000 when its embryonic electronic fruit market saw investors push the share price up to almost €4, having languished in the €1-€1.50 range for most of the previous decade.

The episode left a nasty after-taste. In February, DCC's Jim Flavin took advantage of the run-up in the share price to offload its remaining 9pc stake in Fyffes at an €85m profit.

A few weeks later, Fyffes, of which Flavin had been a director, issued a profits warning and the share price collapsed.

Insider trading case

This was followed by an announcement from Fyffes that it was suing DCC for alleged insider trading, triggering a legal battle that went all the way to the Supreme Court, which finally ruled in Fyffes' favour in July 2007.

By then, McCann had already retired and the company had been broken up. He stepped down as Fyffes chairman in 2003 and as a director two years later.

In 2006, his sons Carl and David, who had succeeded him at Fyffes, announced that they were breaking up the group their father created into three new quoted companies -- a rump Fyffes, Total Produce and property company Balmoral.

The three-way split at Fyffes has not found favour with investors.

Between them the three new companies have a combined market value of just €270m, less than a quarter of the €1.15bn that the pre-split Fyffes had been worth at its mid-February 2000 peak.

The challenge facing his sons, who are fifth-generation fruit-and-vegetable traders, will be to persuade outside investors of the merits of the split.

This will depend on sorting out the mess at Balmoral, which has been hit hard by the property crash and has lost €135m over the past two years, cancelling out the profits earned by the other two McCann-controlled quoted companies.

This represents the sort of challenge that Neily would have relished in his prime.

Now that he is gone, it will be up to Carl and David to live up to the standard set by their illustrious father. If they succeed, they will be worthy successors of his legacy.

Irish Independent

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