On paper at least, the three US hedge funds and a group of Irish businessmen that acquired a key part of Seán Quinn’s former empire a decade ago – for about €98 million – nabbed something of a bargain at the time.
New York-based Brigade Capital and Contrarian Capital and Silver Point Capital of nearby Greenwich, Connecticut – already creditors to the wider Quinn Group, which had been seized by Anglo Irish Bank three years earlier as the lender attempted to recover €2.88 billion owed by the Quinn family – provided €103 million of loans to finance the deal, including expenses.
The assets comprised the former Quinn cement and building materials business and packaging unit – bundled together as a company initially called Quinn Industrial Holdings (QIH).
The investment funds took a 78.6 per cent equity stake in QIH, which was subsequently renamed Mannok Holdings four years ago. Three Irish businessmen that drove the deal, John McCartin, Ernie Fisher and John Bosco O’Hagan, secured three-quarters of the remaining 21.4 per cent, with the rest handed to management, led by Liam McCaffrey, Dara O’Reilly and Kevin Lunney.
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The first set of accounts for QIH in 2014 point out that €37.7 million of “negative goodwill” was booked on the deal at the time of the purchase. Also known as “badwill”, this is an accounting phenomenon where assets are bought at a discount to their intrinsic value.
Still, the hedge funds and the Irish team would get more than they bargained in the following years as they sought to keep the show on the road – before agreeing this week to sell Mannok to Turkish building materials group Cimsa in a transaction worth €330 million.
[ Turkish group to buy former Quinn industrial empire in €330m dealOpens in new window ]
Seán Quinn was initially brought in as a consultant by the current shareholders on a €500,000-a-year contract in 2015, after he emerged from personal bankruptcy. That arrangement was terminated in May the following year after he fell out with his former management team.
A campaign of vandalism against former Quinn Group assets – which began after his family lost control of the wider group in 2011 – picked up again, culminating in the abduction and assault of Kevin Lunney, QIH’s chief operating officer, in 2019.
The former billionaire has consistently denied involvement in any attacks or intimidation. Fortunately, this has eased in recent times – enough for Evercore Partners, the investment bank hired two years ago to find potential new investors as Mannok faces massive investment to reduce carbon emissions, to secure a more stable set of owners than a bunch of US funds.
The emergence of a strong trade buyer is major positive development – underpinning hundreds of jobs in the otherwise marginalised borderland area straddling Cavan and Fermanagh.
Cimsa chief executive Umut Zenar committed this week to “creating new employment opportunities in the region” as it supports Mannok’s continuing growth and sees the business expanding in Europe.
Mannok has invested more than €100 million in capital expenditure in the decade under its current owners, with revenues almost doubling over the period to €312 million and earnings before interest, tax, depreciation and amortisation (ebitda) growing seven-fold to almost €45 million. Total employees have increased by a fifth to 800.
The company’s debt has declined by 30 per cent over the period to €66.8 million. Subtracting this from the €330 million enterprise value of the Turkish deal leaves an equity valuation for Mannok of a little over €260 million.
Quinn has claimed that he was betrayed by the businessmen and management team behind the 2014 deal, somehow believing he was entitled to regain ownership of Mannok in time.
However, the visionary businessman – who started off extracting gravel from his small family farm in Derrylin in 1973 with a £100 loan and would go on to build a multibillion-euro cement-to-insurance conglomerate – lost any such right when his family couldn’t make good on €2.88 billion owed to Anglo Irish Bank following the financial crash.
Most of the borrowings were used to support a leveraged investment Quinn had taken in Anglo Irish Bank between 2007 and 2008, which evaporated as the bank’s shares tanked during the financial crisis and it succumbed to nationalisation.
Mannok’s loans from its hedge fund owners – which carry a 10 per cent interest rate – had fallen to €52.3 million by the end of 2022. The three investment firms, who stuck it out over the past decade and even backed the company’s growth, will receive €205 million for their stake in the Turkish deal. They, and the other shareholders, deserve their reward.
McCartin, Fisher and O’Hagan will each receive almost €14 million. McCaffrey, who stepped down as Mannok chief executive at the end of June – is on track to get €6 million for his shares. The holding of O’Reilly, his successor, stands at €4.6 million, based on shareholder disclosures in the company’s most recent financial statement.
It is believed, however, that O’Reilly and other continuing executives, including Lunney, are retaining most of their shares under the deal with Istanbul-listed Cimsa that will see local management keep a 5.3 per cent stake.
The proceeds don’t even begin to compensate this management team for what it’s been through.
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