Lynch’s puzzling strategy pays off for One51
Some thought him mad, especially when many of the shares were bought from Bank of Ireland Asset Managers, which disposed of most of its 12.5% stake in the diverse group.
As Lynch built his stake, speculation mounted he was about to bid for the group.
That ambition was halted, however, as the Roche family mopped up every available share to ensure they retained control.
Those in the know believe Lynch would have tried a takeover bid if he had secured 29.9% of the equity.
Critics said his action indicated a lack of a coherent strategy for IAWS Co-op, which a year later evolved into One51, now traded on the grey market.
While Lynch may have misjudged his move on NTR, his shareholding is now worth €335m and One51 is set to gain €70m from NTR’s current share buyback programme.
In another 12 months the investment will virtually have paid for itself. It gives One51 a stake in a prodigiously growing sector over the next few years.
Lynch also came unstuck on his bid for Irish Continental Group (ICG) in a joint venture with Doyle Shipping of Cork, acquiring a 25% stake.
Securing control of the ferry company was said to be the new grand plan for One51, that now looks to have gone off the boil as markets falter and the cost of borrowing rises.
Speaking after One51’s annual general meeting in Dublin yesterday, Lynch said he would bide his time on ICG which, like NTR, is a reasonable investment with profits and turnover rising.
Gaining control of ICG would fit neatly with the group’s 50% investment in Greenore Port held jointly with Dublin Port.
But those two investments are far from the full story. Outside the public gaze Lynch acquired some serious businesses in the past 18 months. Central to that has been the development of its environmental services operations.
This division now operates under a standalone structure and may well be listed as a separate businesses within 12 to 18 months.
In the current year it is expected to deliver earnings of €55m on sales of €330m, a near-fivefold increase since 2006. The division accounts for half of One51’s value and is its key trading cash flow source.
The other half comprises its investments in renewables (NTR and Open Hydro), infrastructure (ICG and Greenore Port), food (Irish Pride Bakeries) and a number of portfolio companies.
Of those Irish Pride, the country’s second-largest bakery, is wholly owned.
One51 has continued to grow solidly this year.
Total sales in the current year are forecast to reach €430m, an 153% increase year on year while earnings are projected to rise 131% to €55m, driven by the expansion in environmental services division across Ireland, the UK, Europe and North America, with further acquisitions planed.
With approved debt of €250m on hand plus €50m in cash flow, the group has a €300m war chest to drive all aspects of the business.
It is clear also that Lynch intends to fulfil his commitment to have the entire business, or part of it, listed within 18 months.
While his timing may have been a bit out on a full listing, he has demonstrated there is much more to One51 than thwarted bids.
Apart from ICG, the group bought five metal-recycling companies, took minority stakes in two electronic-goods recycling businesses in the past year. In late May, it bought four more British business in the metals and recycling sectors.
Judging from the tone of yesterday’s presentation to shareholders, investors can expect a lot more to follow in the period ahead.
