Ardagh Glass is poised to float on the New York Stock Exchange and, if the move goes to plan, it will transform its main shareholder, Paul Coulson, from one of Ireland’s richest men into the realms of mega wealthy, writes Kyran Fitzgerald
IN THE autumn, Ardagh Glass, an international glass manufacturer, will float on the New York Stock Exchange, if everything goes according to plan.
A completed initial public offering would value Ardagh at somewhere in the range of €2 billion to €3bn and would catapult Paul Coulson, effective owner of a 34% stake in the company, into the top ranks of Irish paper billionaires.
According to the latest Sunday Times Rich List, Coulson is currently ranked 42nd in Ireland, with wealth estimated at just over €200 million, half of which is attributable to his stake in Ardagh.
Ardagh is expected to move cautiously, releasing a relatively small number of shares into the market, but the initial public offering (IPO) would represent an important coming of age for a company that has enjoyed exponential acquisition-driven growth in recent years.
Coulson, 59, has come a long way over the past 10 years.
His big breakthrough came in 2006, when a company he controlled, South Wharf, gained a majority interest in the Ringsend site formerly occupied by Ardagh’s glass manufacturing plant through a controversial legal settlement with the Dublin Port & Docks board, the owner of the freehold.
The site was sold for €412m the following year, to the BecBay consortium, consisting of developers Bernard McNamara and Derek Quinlan, and the Dublin Docklands Development Authority. South Wharf and Coulson, along with around 1,300 shareholders, held on to two-thirds of the proceeds.
This financial coup, engineered on the back of a legal loophole, has cost the taxpayer dearly, but has proved to be a massive boon to Coulson as he set about building an international glass empire.
From the late 1980s, the Jesuit-educated accountant, nicknamed ‘the Cooller’, ran one of the better known tax-based financing companies, Yeoman International, out of a base in Shannon availing of tax reliefs then in operation.
In 1988, Yeoman acquired British company CLF Holdings for over £100m, saddling the group with heavy debts. It proved to be a bad investment and, as the British economy tanked in 1990, a major division of CLF posted large losses. The Yeoman share price also plummeted.
Coulson fought back, suing his advisors, finance house SG Warburg, and London lawyers Linklaters. Eventually, a settlement was reached. Yeoman netted around €44m, debt was paid down and Coulson was back in business.
He spread his net, acquiring Tipperary Crystal from a receiver and building up a stake in Ardagh Plc, a relatively sleepy cash-rich glass maker, the renamed Irish Glass Bottle company. This entity had been established with financial backing from the people behind the Irish Hospital Sweepstakes.
He invested in Cityjet and joined forces with friends in Davy Stockbrokers to invest in land near Eircom Park, the planned FAI soccer stadium in west Dublin, later shelved in favour of Bertie Ahern’s now defunct Bertie Bowl. But a better route to riches was quietly opening up. In 1998, Yeoman acquired 15% of the glass maker, Ardagh, building the shareholding up to 23% by 2000. Businessman Sean Quinn, a major force in the glass industry, also sought to gain control of Ardagh, triggering a long feud with Coulson, the company chairman.
In 2002, Coulson made his move.
The glass factory in Ringsend was closed with the loss of 375 jobs — long-serving employees had to content themselves with the minimal statutory redundancy payments. The company argued that the plant was “uneconomic” — by then, with the property market beginning to boom, it was clear the site was worth a lot more as a developable asset.
That year, Coulson also announced plans to delist Ardagh from the stock exchange and to spin-off the overseas glass manufacturing operations into a new entity, Ardagh Glass. South Wharf was established to hold the remaining assets, consisting of the leasehold interest in the Irish Glass site in Ringsend. This was held under a 99-year lease from the Dublin Port company running to 2065. In 2002, the lease was estimated to be worth €20m.
In 2005, the landlord served an eviction notice on South Wharf, which had sought to force the company to sell the site to it for €20m. South Wharf sought to take advantage of a loophole in the Landlord & Tenant (Ground Rents) Act, 1978, under which holders of leases in excess of 50 years were entitled to acquire the fee simple in, and thus control over, the property. Previously, developer John Flynn used this provision to force the IDA to sell the fee simple in property he occupied under lease, reducing the value of the landlord’s interest dramatically.
The President signed into law emergency legislation covering IDA property. This led some to wonder why this provision was not extended to cover all publicly-owned assets.
Despite a 2005 judgment in favour of Dublin Port, South Wharf was able to negotiate a very favourable settlement with the port company ahead of the 2007 sale of the Ringsend land to the Becbay consortium, one of the most high-profile property deals of the boom.
South Wharf ended up with almost €274m. Coulson netted €30m through a direct stake and through his investment vehicle, Yeoman.
The consortium ended up with a site currently worth around €40m-€50m, with NAMA and the taxpayer on the hook for hundreds of millions. A potentially valuable public asset appears set to burn deep holes in the public purse: the assets have been largely privatised and the resulting debt will, it seems, be nationalised.
Ardagh Glass, meanwhile, found itself engaged in conflict across the Irish Sea with Sean Quinn, who had established a large glass operation in Cheshire in opposition to Ardagh’s British operations.
Ardagh renegotiated contracts, pushing through price increases, helped by a buoyant economy.
The key was a €660m deal in 2007, to acquire the glass manufacturing operation of Rexam, a deal funded in the bond markets.
This reduced Ardagh’s exposure to the British market from two-thirds to one-third by giving it a significant Continental European footprint. Rating agency Standard & Poor’s upgraded Ardagh, despite the additional debt taken on, claiming “the merged company will have a much stronger marketing position in Europe, increasing its bargaining power”.
Ardagh has continued to raise money in the capital markets to fund its expansion. Last September, it made its biggest move yet with the €1.7bn acquisition of Impress from private equity company Doughty Hanson.
As a result, it is now one of Europe’s largest glass container manufacturers. Almost 40% of its shares are controlled by Yeoman Capital, which has received over €10m in share buybacks.
Another €800,000 in management fees was paid out to Shrewsbury investments, a Coulson family entity.
Ardagh’s expansion has echoes of boom time corporate euphoria. Could Ardagh face a GPA style IPO flop on Wall Street? Unlikely. The glass industry is not like aviation, which is more prone to dramatic swings. Ardagh’s €1.7bn bond placing, last September, was over-subscribed. The enlarged Ardagh has revenues of €3bn and is centred on real-time manufacturing, which is ironic given that its controller will be remembered as the man who closed down the Republic’s last major glass manufacturing plant.
In many ways, Coulson is the perfect representative of 21st century capitalism: Canny, unsentimental, a touch ruthless, internationally mobile, professionally trained, loyal to his friends, dismissive of the media and nothing flash about him.
This autumn, he could go global as his enlarged group takes a bow on Wall Street.