Business World

Tuesday 23 January 2018

Newsmaker - Gary McGann

Tony Smurfit , left, and Gary McGann pictured at Smurfit Kappa AGM
Tony Smurfit , left, and Gary McGann pictured at Smurfit Kappa AGM

Gary McGann

At the depths of the financial crisis, packaging giant Smurfit Kappa was flirting with disaster.

Born out of a 2005 merger between Jefferson Smurfit and Dutch firm Kappa, the group had floated on the stock market in 2007 at €16.50 per share. Within the space of two years, it had collapsed to just €1 as world economies shuddered.

With private equity groups CVC, Madison Dearborn and Cinven among the major shareholders in the company, there were warnings in early 2009 that Smurfit Kappa was in danger of breaching a 2010 debt covenant.

There was even the chance - albeit low - that Smurfit Kappa could have to undertake a distressed equity issue. It had net debt at that stage of €3.1bn and the price of corrugated boxes and recycled containerboard was still on a downward trajectory.

Its debt to EBITDA ratio (a common industry measurement of a company's leverage and how quickly it could potentially repay its debt) at the end of 2009 was 4.1 times - a level that normally starts to give investors the heebie jeebies.

But with determined resolve, no-nonsense chief executive Gary McGann and his team had already set about deleveraging the group.

Coupled with aggressive cost-cutting, Smurfit Kappa emerged as a well-oiled machine. Its net debt at the end of March was €2.9bn, but with its debt to EBITDA ratio having shrunk to a much more manageable 2.5 times.

Having helped whip the business back into shape, Mr McGann, a former chairman of the Dublin Airport Authority who was raised in Palmerstown, announced last week that after 13 years as boss of Jefferson Smurfit and then Smurfit Kappa, he'll bow out in September. He'll be succeeded by chief operations officer Tony Smurfit.

But it will far from mean the end of his extensive and varied near 50-year corporate career, which included an eight-year stint at the Comptroller and Auditor General's office, during which he studied at night for a BA and an accountancy qualification.

Mr McGann, who turns 65 in August, is now apparently eyeing the chairmanship of gambling firm Paddy Power, where he's already a non-executive director.

The former Aer Lingus chief executive (he left in 1998 to join Smurfit as its chief financial officer), has had plenty of strings to his bow - but only one, his non-executive directorship of Anglo Irish Bank - that he'd care to forget.

"I have a number of things that I'm going to do," he said following Smurfit Kappa's annual general meeting last Friday. Downtime is likely to figure sparsely.

Irish Independent

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