Dr Michael Smurfit and developer Gerry Gannon are to buy the K Club golf resort and a defunct paper mill from Jefferson Smurfit Group (JSG) for €115 million. Barry O'Halloran reports.
Dr Smurfit, who is chairman and a 7.7 per cent shareholder in JSG, ended three years of speculation yesterday afternoon when he and Mr Gannon agreed to buy the Kildare Hotel and County Club, known as the K Club, and Clonskeagh paper mill in Dublin, from the group.
A statement from the company said that it had agreed to sell the two properties to a group of investors that included Dr Smurfit. The company said that the price was €115 million.
The statement added that JSG's non-executive directors and its shareholders, including US venture capitalist Madison Dearborn Partners, had unanimously approved the deal.
Dr Smurfit retained the right to buy the K Club from JSG up to 2007 when Madison Dearborn took it private in 2002. Since then, it has largely been assumed that he would move to buy the club within that period.
It will host the Ryder Cup, a biennial showdown between the best European and US professional golfers, next year.
Many observers believed that the company would sell after the tournament, when the Co Kildare venue would have an enhanced profile.
The company's statement said that the independent directors had satisfied themselves that the deal represented fair value. The money will be used to pay down the company's debt, cutting it from €2.62 billion to under €2.5 billion. This will save it €6 million in interest payments.
JSG has been carrying a large amount of debt since Madison Dearborn took it private for €3.7 billion in 2002. The move left it with €3.4 billion in debt. At the end of last year this stood at just under €3 billion.
Earlier this year, it issued €670 million in corporate bonds to replace more expensive debt. It has also been selling smaller business units and minority interests. In February it closed the Clonskeagh facility, the last of its kind in Ireland, with the loss of 70 jobs.
The two acre-plus site forms part of the deal agreed yesterday. It has no planning permission and its new owners will also be obliged to clear it and ensure that it is environmentally safe. It is not known what they plan to do with it.
Dr Smurfit's partner in the deal, Mr Gannon, is a developer and property dealer. Historically he was more associated with buying and selling sites with development potential than for developing them himself.
However, more recently he has become involved with that side of the business. Mr Gannon has a reputation for being publicity shy and is also a supporter of Fianna Fáil.
The K Club forms the main part of the deal. Its facilities include two world class golf courses designed by Arnold Palmer, a legendary US professional, a luxury hotel with room prices varying between €400 and €3,800 a night, fishing, clay pigeon shooting and horse riding.
The group built it, but it was widely regarded as a vanity investment on Dr Smurfit's part. However, last year JSG chief executive Gary McGann described it as the group's legacy to the Irish people.
He said it was built in response to Government pressure on the company to "put something back" into the country in return for a more practical treatment of foreign earnings and outgoing foreign dividends.
JSG opted for the development because leisure was seen as a growth industry at the time, according to Mr McGann. The group does regard the property as a non-core. It has also been claimed that it has not been profitable for several years.
Combined golf-course and hotel properties are popular with investors.
Last year, Wentworth in the UK sold for €187 million. One of the bidders was the Seán Quinn-led Quinn Group. It had to give way, but subsequently paid a similar sum for the Belfry, another high-profile English golf resort
