On a crisp day in January 2005, about 4,000 people marched through the streets of Carlow to protest the closure of the town’s Greencore-owned sugar-beet factory. Farmers, factory workers and local shopkeepers massed at the factory gates to voice opposition to plans to shut one of the iconic industries of the Free State, a 75-year-old business that was once viewed as a paragon of public enterprise.
As speaker after speaker denounced the decision by Greencore to shut its Irish Sugar plant, one of those present said the rally was less a protest and more a funeral. The sugar industry, under threat from a change in European trade rules, was dying. A sense of inevitability hung in the air.
Last week, following a decision to get out of sugar processing entirely, Greencore and the sugar-beet farmers squabbled over the will.
Both sides were unhappy at the carve-up of a €147m compensation package announced by Mary Coughlan, the agriculture minister. More protests by farmers and possible legal action are threatened.
As the bickering continues, the fate of the entire Greencore company is being decided elsewhere. A great Irish industry falling prey to a low-profile property developer is just a sign of the times.
The enigmatic Dundalk property developer Liam Carroll’s purchase of a 22% stake in the company for €171m this month has altered Greencore’s fate. The developer is intent on gaining access to Greencore’s 900-acre land bank. If that requires a break-up of the company, so be it.
“He’s beginning to like these deals,” said one business associate. “He’ll wait until the fuss over the sugar compensation is out of the way and then make his move.”
ACCORDING to Patrick Coveney, Greencore’s chief financial officer, it is business as usual for the company in spite of Carroll’s recent entry onto its share register. “We had one large private individual shareholder (Dermot Desmond) and now we have another. From our point of view, nothing has changed. We are continuing to drive the core business forward for all our shareholders.”
Few in the wider market believe Carroll’s purchase of Desmond’s 22% stake in Greencore is anything other than his first step in a plan to take control of the company. Greencore’s share price hit €4.25 at one point last week, valuing the company at €837m.
“He (Carroll) won’t have much interest in the food business,” says Paul McNulty, a fund manager with Setanta Asset Management.
“It is not a business that he would see as attractive. He obviously is only interested in the properties.”
It’s a view shared by most analysts and fund managers; any developer would love to get hold of Greencore’s property portfolio.
The assets include a 320-acre site in Carlow town and 300 acres close to Mallow in Cork, both former sugar-processing plants. It also includes a 125-acre site at Littlehampton in southern England, about 50 miles from Gatwick airport. That site is currently used for market gardening, but the company hopes to have it rezoned for residential purposes within a couple of years.
David Dilger, the Greencore chief executive, has been keen to play down the value of the sites, particularly in advance of the government decision on how the sugar-restructuring compensation fund should be divided.
He was worried Coughlan would play to the gallery and give most of the €145m fund to beet growers on the basis the company had attractive assets that would more than compensate it for lost business.
The properties are undervalued and on Greencore’s books at just €40m. The Irish Farmers Association recently valued the land assets at €187m in a study carried out by Finnegan Menton, an estate agent.
The Carlow site is particularly valuable. Situated in the heart of a town that is almost a suburb of Dublin, it represents a unique development opportunity for Greencore and the local authority. The two sides are in discussions about a development plan for the area and Dilger has made it clear the company will develop the site itself in a bid to maximise value for shareholders.
Greencore shareholders might not be so willing to sit around and wait for Dilger to “unlock” the value. A frustrated Desmond, for one, clearly wasn’t.
“Liam Carroll obviously sees enormous potential in these sites and that’s what he wants to tap into,” said one senior corporate financier in Dublin, who asked not to be named.
Carroll knows his way around takeover battles. In 2002 he wrestled control of the all-Ireland property company Dunloe Ewart from the solicitor Noel Smyth in a move that cost him €179m.
On that occasion he teamed up with Desmond to squeeze Smyth, a wily businessman, out of a company he had put together.
Carroll made his money building no-frills apartments around Dublin, hitting the headlines for poor health and safety practices at his work sites. His main operating company at the time, Zoe Developments, was described as a “recidivist criminal” by Peter Kelly, a High Court judge. “The workers on whose sweat you make your money are treated with contempt,” he added. At the time, Carroll and his apartments, were attacked by An Taisce, the heritage lobby group.
Nearly 10 years on, Carroll is now developing a prestigious science and technology park at Cherrywood in south Dublin, and his highly acclaimed Gasworks development close to Dublin city centre was cool enough to attract Google.
“He’s gone from one end of the scale to the other,” said one rival developer. The Dundalk man has also become phenomenally wealthy, with his business worth up to €700m.
Market sources say the deal to buy Desmond’s stake was completed in double-quick time and there was no hint beforehand that he was buying the shares. Very few Irish businessmen have the ability to execute such a large deal so quickly.
NCB handled the share deal for Carroll and is known to be advising him.
His move is said to have sparked the interest of private equity groups and trade players that have spotted the potential in Greencore Foods (formerly Hazlewood). At least two groups are said to be “nosing about” Dublin to see if there is anything worth picking up.
Stock-market analysts estimate Greencore Foods could be worth up to €650m as a stand-alone entity. This is based on a buyer paying about seven times its earnings before exceptionals.The business, based across 22 facilities in Britain and employing 9,000 staff, is a low-margin, high-volume operation that is often subject to the whims of supermarket groups that have the muscle to squeeze suppliers on price.
However, Greencore has a number one or two position in each of the segments of the market in which it operates, including sandwiches, ready meals, mineral water, cakes and chilled sauces. It is also growing at a faster rate than the 5% average growth being achieved in the £7 billion (€10.2 billion) UK convenience foods market.
Greencore is also one of the world’s biggest makers of sandwiches, producing more than 200m a year. The business generates lots of cash, has good top-line growth and is relatively recession-proof, all qualities that would endear it to private equity players.
According to analysts, there is no shortage of private equity funding available at present, which is probably why Northern Foods and Heinz are selling assets and why Unilever has put Birds Eye up for sale.
Electra Partners, NBGI Private Equity, Lion Capital and 3i have been touted as potential buyers. Trade buyers could include RHM, Premier Foods, which recently acquired the Campbell Soup Company’s UK and Irish operations, IAWS, and Kerry Foods, which has a convenience food operation in the UK and is looking around for acquisition targets.
Bought for €427m in December 2000, Hazlewood represented a giant leap of faith by Dilger.
Since taking the reins of Hazlewood, he has sold off or closed dozens of loss-making or non-core parts of the business and changed the culture within the organisation to being one of a low-cost operator.
From a position where Greencore was saddled with debts of about €875m in early 2001, it now owes less than half that amount.
Hazlewood and Dilger’s efforts have done little for the Greencore share price. Until the sugar compensation and property development prospects loomed, its share price was going nowhere.
THE question now is whether Dilger will seek to accommodate Carroll or rebuff his advances.
One source close to Dilger, however, is in no doubt. “David is a very honest guy, he wouldn’t do the job if he didn’t feel he was giving it 110%. Whatever comes out of this, have no worries, he’ll be up for it.”
However, the Greencore chief executive, who is 50 in October, expressed the view in a newspaper interview last year that he wanted to take on one other big job, outside Greencore, before retiring. One of Dilger’s difficulties is that Carroll is entirely unpredictable. His car is a few years old and unlike many of his peers he doesn’t own a helicopter, jet or a property in Marbella or the Caribbean.
He is said to live in a middle-class home in Mount Merrion, south Dublin.
“He is so modest it’s unreal,” says one leading businessman who has worked with Carroll.
His sole motivation, it appears, is to buy land and develop, and he has the financial resources to get his own way.
Once again, there is a sense of inevitability in the air.
