If 1999 was dominated by the Telecom Eireann privatisation, the millennium year was also one in which a major telecoms deal took centre stage, this time BT’s acquisition of Esat and the remaining 50 per cent of Ocean. Telenor, for whom AIB Corporate Finance had the privilege to act, were very happy with the outcome in terms of value creation and providing liquidity for their minority shareholding in Esat Digifone. With Eircom coming back into play not long afterwards, it could seem that not so much else was happening. Nothing could be further from the truth and while, particularly in the second half of the year, a litany of industrial relations problems dominated the headlines, the structure of much of Irish business continued to develop rapidly through a wide range of significant deals which, when the numbers are counted, look likely to result in yet another record year in mergers and acquisitions.
The progress towards privatisation of our semi state companies continues to attract much public interest. The enabling bill for the Aer Lingus IPO is expected in the first quarter of 2001 while the ESB Board is reported to remain divided on privatisation with worker directors, a significant minority, against any future privatisation. The privatisation of Dublin Bus, recommended by Minister O’Rourke this year, is a complex matter, likely to proceed on a phased basis over a number of years as specific franchises are granted to private operators.
While it was not a year for major banking acquisitions, there was considerable activity in the overall financial services sector. The acquisition of Hibernian, by CGNU, was probably the first major transaction to close in the sector this year and ensured that we at AIB Corporate Finance had a busy start to the year. It was the largest ever acquisition of an Irish financial services company at that time and continued the trend of consolidation in the insurance sector. Other than a little excitement over the destination of the TSB, and more recently speculation of renewed interest in ICC, it is interesting to note that e-commerce is emerging as a feature of M&A activity in the sector. The merger of Enba’s First-e with Spanish Uno-e, was the biggest deal in the first half of the year involving an Irish company as buyer or partner. Later in the year a relatively small acquisition (Stg?26 million), but perhaps a sign of things to come, was the November purchase of the personal finance website, MoneyXtra.com, by Bank of Ireland’s UK building society, Bristol & West. Also in November, AIB acquired a shareholding in HotOrigin.com following its earlier acquisition of a shareholding in Orbiscom. In September, AIB announced the proposed merger of its two banking interests in Poland, WBK and Bank Zachodni, requiring my colleagues at AIB Corporate Finance to brush up on how to order a pint in Polish. The disappointing performance of standalone, separately branded, online banking operations led AIB to reconsider its plans to develop a similar operation and it now looks increasingly as though the model for banks going forward will be the addition of an online services suite to their mainstream businesses.
There has undoubtedly been much over hyping of internet-based businesses and 2000 has seen some lacklustre performances and indeed high profile dot.com failures combining to bring some sense back to the markets. The internet is a channel, not a recipe for automatic success. Good business models will continue to succeed. Baltimore Technologies, which rose from small beginnings just a few years ago to become a FTSE 100 company, has been on the acquisitions trail acquiring the British internet security software group Content Technologies for Stg?702.5 million in September, and signing an agreement to buy Canadian-based software development company, Nevex Software technologies, in an all-stock deal worth about Stg?29 million in October. Riverdeep is also showing an acquisitive streak, no sooner floated than acquiring US language software company, ED-Vantage Software, in a $20.1 million cash and stock deal. Trintech is closing the year with a number of acquisitions. Now that flotation is to be approached with some caution, and venture capital companies becoming much more selective with their funding, companies in the sector are likely to adopt a broader perspective on their growth options and I would expect to see a strengthening of the trend towards mergers and takeovers.
In industry the usual suspects have been hard at work with Smurfit Group making acquisitions in North and South America and in Denmark, while Elan’s $1.8 billion acquisition of US pharmaceuticals group Dura was the biggest in its history, and that following the ?469 million purchase of Liposome earlier in the year. Greencore, CRH and Independent News & Media have all been spending, the latter acquiring the Belfast Telegraph. Media acquisitions going the other way saw Scottish Radio Holdings acquiring the Kilkenny People and Ireland On Sunday. The much heralded pick up in MBO/MBI activity appears to be arriving at last. The sale of the Mater Private Hospital in November to six individuals for ?33 million was in effect an MBO by four non-executive and two executive directors. The Green Property management team abandoned their MBO bid while Adare Printing, the subject of rival MBO bids, eventually went the way of Mr. Nelson Loane’s consortium for ?127 million. Unquoted cast-iron stove manufacturer Waterford Stanley was taken over in a ?16.85 million MBI. Going back to Clondalkin last year and since, low valuations have been a key factor encouraging more MBO attempts and I would expect that this trend will accelerate.
It has long been the conventional wisdom that the best way to win at the races is to be a bookie and now it looks like we’ll all get our chance to have a piece of the bookmaking action. What odds would you have given just a few short years ago that Paddy Power would soon be floating on the Dublin and London stock exchanges? The chain has just confirmed its intention to do so in an institutional placing which will seek to raise ?18 million giving it a market capitalisation of ?92 million. Well, you don’t have to be a betting man to forecast that 2001 will be another hectic year on Ireland’s corporate finance scene.
John O’Donnell is managing director at AIB Corporate Finance. |
