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Sunday paper overview from Valero Financial

Sunday Business Post

Willie Walsh is supposed to be making one last attempt to take over Aer Lingus after the Government rejected his latest offer. I thought he had very little chance after last week’s setback but Paddy Power are suggesting there is nearly a 50/50 chance that IAG will takeover Aer Lingus which is interesting.

The Business Post reveals that the Japanese hotel owning Nishida family are the new owners of Abbeville, the former estate of Charlie Haughey. They paid €5.5m for the property in 2013.

Richie Boucher, Head of BOI, who was Head of Retail during later boom years, said during the week at the banking inquiry that the biggest mistake he felt he made was placing too much reliance on the security that property provided to loans made in boom times. He also said it would be mid 2016 before dividend payments would resume.

Paddy Kearney, one of the “maple 10 developers” is in legal action against Le Bruin Private led by former head of lending in Anglo, Tom Browne. It involves an Anglo Bond with a face value of €27 million that was bought back by a syndicate including Kearney and Browne from Carval for €2m and sold for €6m but worth a lot more now. Kearney is questioning whether it was sold too soon.

Dentists and Pharmacists employed by the HSE are asking for the fee/pay cuts in the austerity years to be reversed.

Paddy McKillen has lodged papers in Dublin Courts in order to force any other shareholders in the Maybourne luxury hotel group (Claridge’s, the Connaught and Berkeley hotels) who may be selling shares to offer them to him. McKillen owns 36% of the holding company, the Barclay brothers own 28% and the old Quinlan vehicle owns the rest although the Barclay brothers own the debt which has these shares as security. The Times reports that Abu Dhabi investment authority have offered £1.6bn for the Maybourne hotel group. This would be a big uplift on the price paid by Quinlan and McKillen.

In a separate article it shows from FOI requests that the Barclay brothers and a Qatar wealth fund tried to contact Brian Lenihan a number of times and spoke with John Moran, the then secretary general of Dept Finance. They were trying to get control of the group through buying the NAMA debt at par.

“The Discovery Channel has informed the Competition Authority that it intends to acquire the Asian arm of Setanta Sports for an undisclosed sum.” In 2009 Denis Desmond bought 40% of Setanta to bring his shareholding up to 60% and in 2011 Michael O’Rourke bought this out. Setanta are an amazing recovery story, they have operations in almost every continent to complement their very successful Irish business. They have bounced back remarkably having lost out in the deep pockets game of premiership rights in UK c.7 years ago.

“The Irish wind energy industry has cried foul over what it says will be a tripling of the commercial rates that wind farms must pay to local authorities.”

“Entertainment entrepreneur Donal Shiels has emerged as the leader of a new team which will aim to rescue Fossett’s Circus, which is in examinership.”

iNua Hospitality have bought the Muckross Hotel and Spa in Killarney for €6.25m, Radisson Blu in Cork for €9m and Limerick for €3.5m. They have raised a further €20m and are also in the market for nursing homes as I understand it.

“The Kangs, who own the €20 million Fota Island near Cork city, have bought the Springhill Court, a three-star Kilkenny hotel. The sale to the family’s Xiu Lan hotel group was handled by Stephen Tennant of receivers Grant Thornton.”

Ulster bank reported a €752m profit figure last year (€1.7bn loss in 2013) helped by a €453m write-back. They seem to have turned the corner and with all bad loans in RCR and fully provided for the Irish story is a lot more positive and RBS are committed to continuing in Ireland. When they get RCR out of the way it will make life easier for Ulster to preach about the fact that they are lending.

Linked Finance raised €2.5m from Frontline ventures and they hope to facilitate €250m of lending to 5,000 SMEs over the coming years.

Newstalk are currently without a CEO in the absence of Gerard Whelan and they are looking for a replacement.

The ISEQ hit the highest level in seven years last week. Kingspan, Glanbia and CRH have been big catalysts to the rise in recent weeks.

McWilliams suggests that human nature should ensure that a repeat of the economic catastrophe we witnessed post 2008 will occur. Pricing loans and everything off the latest price is flawed.

Allsop’s first online auction will feature 70 residential properties and bidding will start on March 18. This is a very innovative service and if successful could shake up the way property is sold in this country. It wouldn’t be the first time Allsops/Space positively disrupted the market.

Sunday Independent

The CSO figures this week show salaries rising. This could be good for the economy providing it does not put unreasonable pressure on the exchequer and businesses’ cost base

Kerry Entrepeneur Frank Murphy’s Monex are being advised by Investec and have their “ear to ground” regarding a sale and are reportedly valued at €100m.

Garret Kelleher was one of the few people NAMA targeted for a judgement where NAMA did not succeed.

Ladbrokes who employ 1,400 staff in the Republic and have 196 stores are looking at all of their strategic options in the Republic under a project called Project Arthur. The Indo estimate that they lost €3m in the south of Ireland last year. Ladbrokes appear to have a made a mistake changing it from a largely autonomous unit in Ireland to one reporting to the UK. The Indo suggest that examinership may be an option in order to reduce rents but I doubt it would be as easy as that as the plc would be the covenant on most leases. Boyles and Powers have more shops in the Republic and are more profitable. None of the Big English firms have managed to be successful in retail in Ireland. Brian Carey highlights that Paddy Power with market share of 40% may not be in a position to take Ladbrokes’ Irish operation over.

Colm Lyons is in discussions about buying Realex Payments for €25m, he owns 79% of the firm. They generated €2.1m in profits last year off sales of €18.1m. Gerry Barry’s Fintrax was sold for 12x EBITDA last year. EY are handling sale and Laurence Crowley is chairman.

Hays recruitment are focusing on getting people back from Australia to Ireland now for the first time since the boom. Hays had 200 people working in Ireland at the peak, have 90 now having fallen to 45 at trough. They are reporting a big pick-up in activity. Like a lot of other professional services recruitment has seen a number of new entrants operate under new brands such as Ronan Colleran’s Colleran Consulting and Azon who we know are also growing fast and busier than ever.

Ulster Bank had 130 million transactions online last year compared to 30 million in branch. They have a €500m fund targeted to finance home-building.

Mainstream raised €100m from a Japanese firm in return for 25% of company and they are looking to raise €75m now for 20% in pure equity. It has a lot of global holdings but is focusing growth in Latin America and Africa. Eddie O’Connor “does not see any future for wind farms in Ireland”

Enterprise Ireland, Kellysan (a fund involving the Kelly family of Kentz fame), Dolan family (shamrock gifts) are all backers of Oxymem, a “revolutionary new water treatment technology”. They are now raising €20m probably from bigger institutions. Noel Kelly said Kellysan was set up to diversify his interests away from Oil and Gas. They have also invested in a waste plastics-to-fuel firm called Cynar, Eddie O’Connor’s Mainstream and mobile messaging security firm, Anam.

Richard Curran highlights that farmers who were part of the original Glanbia co-op negotiated hard in 2013 and got 20% more of Glanbia plc than they were originally offered and at a valuation of nearly €5bn this now worth a billion to farmers.

Richard Curran highlights that BOI have 27% share of savings market, 50% share of SME/Agri lending and 30% of Corporate banking and the times show that they have 30% of the car loan market.

Sunday Times
There is an interview with Richie Boucher in the Times. It covers his recovery from cancer.
He seems to go for a truth over harmony approach in the board room and it has obviously stood the bank well. The tight business it is is highlighted by the fact that their net margin is running at 1.5%. When challenged about a lack of credit in Construction he said:
“I don’t think the problem in development is a lack of credit, it is a lack of equity. We are willing to fund 66-70% the problem is the other 30-33%”

This is true for SMEs as well. This is where good partners like Renatus are needed to help finance equity for SMEs particularly for MBOs/MBIs.

The theme from the international conference on Private Equity in Berlin last week was that prices are sky high and there is too much money chasing too few assets. Debt averaged 5.1x earnings in 2014 having been 4.3x in 2012. The Bank Of England is following the lead of the Fed by restricting the amount amount leverage to avoid a repeat of the past. The Fed has capped debt at 6x earnings.

Frank Cronin, ex CEO of Newstalk, is Chairman of IRS+, which sells local radio ads to agencies in Dublin.

Carlyle Cardinal Ireland look set to acquire Payzone Ireland. CCI raised €292m from Private Investors and the NPRF. They acquired Lily O’Briens. Payzone made €1.3m on turnover of €195m in 2013. Sources estimate that current EBITDA is €5m valuing the business at €30-€35m. Duke Street Capital bought it in 2008 and will do very well from the exit.

Oil services company Suretank, based in Louth has completed two acquisitions worth €15m. A Scandanavia Firm Hitec Vision bought a majority stake in Suretank from Patrick Joy valuing the business at €52m.

Donnybrook Fair is opening its seventh outlet in Cork.

Dermot Desmond and Larry Goodman are understood to have increased their stake in One51 in recent weeks. Nick Furlong’s Pageant is the largest shareholder currently. They intend to float in the 2016. Shares are currently trading on the grey market at €1.20 having dipped as low as 15c in 2013.

NAMA are likely to sell the Gresham in Dublin and Cork for €40-50m shortly.

Fascinating interview with Ray Coyle whom we mentioned last week has all but exited Largo foods and is focusing all of his energies on Tayto Park. He was a multimillionare in his mid twenties and was forced by bank to sell everything when he was 32/33 on the back of a collapse in Potato prices. He copied Barney Curley’s effort at selling land through a GAA club draw and managed to escape with enough to set up his snack foods business which sowed the seeds for his Largo empire. In 2013 his theme park made €2.8m profit. The Park was valued at €27m last year and he is putting up more than 80% of the €26m expansion currently underway.