At 83, entrepreneur and businessman Michael Smurfit is acutely aware of the danger that coronavirus poses to his health, which is why he has been cocooning at his apartment in Monaco since St Patrick's Day when the principality introduced its lockdown to contain the spread of the virus.
“I’m walking around the apartment here rather than being allowed outside to stay fit, and obviously I’m being very careful what food I eat because you can get the temptation to drink a lot and eat a lot,” he says via a Skype call for an interview with Inside Business, an Irish Times podcast.
The virus does not respect reputations. Monaco's monarch, Prince Albert II, who Smurfit describes as "my dear friend", contracted the virus but has recovered. Smurfit spoke to him only last week.
"I've got to be very careful about my diet. I do check my blood regularly and I have had a check for the virus and it was obviously negative, thank God,"the former Smurfit Kappa chief executive and chairman says.
He still hasn’t seen his latest grandchild – number 14 – in the flesh “for obvious reasons”.
“Hopefully when the lockdown takes a step forward on June 3rd, we’ll be more free to go around to restaurants and so forth,” he says.
Smurfit is critical of the total lockdowns that have been put in place in so many countries. “My own view is that the lockdown will, upon examination by historians, look [like] a very serious mistake. There should have been a partial lockdown for elderly people and people with underlying symptoms and so forth. But to lock down entire populations, period, never happened before, destroys the economy, destroys jobs, which is going to last for years and years to come. It’s going to be a very tough time ahead, I’m afraid.”
In Ireland, some 14 per cent of confirmed cases have been people over the age of 80, while in Italy a third of deaths have been in this age category. Smurfit is not “worried” about death” as “when I was in my late teens and early 20s I was diagnosed with a severe form of tuberculosis and they more or less hinted at me that I might not have a year to live. They thought that would be a generous amount of time if I did.
“When I was in Peamount sanatorium [in Dublin], I held people’s hands when they died...because I was a sacristan in the hospital at the time and lucky enough got out after nine months and never looked back because they developed new antibiotics that cured me. Every year since has been a bonus to me.”
Smurfit famously spent that time in hospital reading Investors Chronicle and the Financial Times cover to cover, a launchpad for the storied business career that would follow.
Smurfit hasn’t been involved in the running of Smurfit Kappa, the packaging company founded by his father in the 1930s, which he helped make into a world leader over many decades at the helm, since 2007 when he stepped down as chairman.
He makes clear he’s not privy to any key numbers at Smurfit Kappa, which is now led by his son Tony, and he doesn’t allow himself to become an insider with the listed company. But he did offer this view on how the pandemic might impact on Smurfit Kappa’s operations.
“They are going to be affected obviously as every company is going to be affected. It would be up there in the supply chain because food and beverage is a very large part of the business, about 70-80 per cent of the business.
“I would suspect that demand will come back to more normal levels. The non-food and beverage [part of the business] would be very severely hit, so what the demand will be for packaging going forward I don’t know but I assume it will be less rather than more for the next few years.”
The Smurfit group did very well out of the K Club thank you very much
During his career, Smurfit often used economic downturns as an opportunity to pounce on vulnerable rivals. “I coined the phrase, the worse it gets the better it gets because nobody sells you a successful business, they only sell it to you when they are doing badly and in trouble. I waited for those times.”
He claims to have seen the downturn coming, if not via a global pandemic. And it was one of the reasons he decided to sell – for a reported €70 million – the K Club hotel and golf resort in Kildare, which the Jefferson Smurfit group had acquired in 1988.
It was a pet project for Smurfit who later took ownership of it with property developer Gerry Gannon before acquiring Gannon's stake from Nama in 2012.
“I looked at my portfolio very carefully and I was heavy in physical assets like the K Club and my home in Spain and some other things. I didn’t see any upward potential from here on, the market was selling at 20-plus times earnings and ratios had gone through the roof.
"We had the first trillion dollar company [Apple]. Whether any company is worth a trillion dollars I don't know, particularly in the tech service area. Because one day you're a hero like Nokia and Ericsson and the next day you're out of the game."
The K Club had accumulated losses of €49 million by the end of 2018, but Smurfit insists it was a successful venture in the round.
“It was designed as a tax scheme for Smurfit group to bring money back to Ireland from abroad. At the time we were paying . . .taxes in America, taxes in Holland and taxes in Ireland.When the double taxation agreements were written way back in the ’30s, nobody ever foresaw an Irish company operating in America, so double taxation agreements were all one-way. We were paying 70 per cent of income in taxes that we earned in America, which was the biggest source of income. That didn’t make sense.
“The government introduced a thing called participation privilege, which allowed me to invest money in Ireland if I created 200 jobs. So I created the K Club.
“The Smurfit company got the tax breaks and made a lot of money on property sales before [hosting] the Ryder Cup [in 2006]. I think about €100 million. And then they got €100 million from me to buy it. The Smurfit group did very well out of the K Club thank you very much.
“I didn’t make any money out of it and I didn’t take any money out of it. I had a very comfortable home there for years but I don’t get to go there anymore. The last full year I was there [for] five days, and the year before that, seven or eight. Without having a family member wanting to take over and run it, there was no point to keep the asset.”
The Ryder Cup will return to Ireland in 2026 when Adare Manor in Co Limerick hosts the tournament, having had a multi-million makeover in recent years, funded by JP McManus and his family. Smurfit has visited and approves of the facelift.
“They’ve turned it around from a dank dismal type of place into a luxurious resort, right up there with the very best in the world,” he says. “He designed it specifically to get the Ryder Cup and knowing JP and his determination, which is similar to my own, he just went out and got it. He’s very kindly invited me to join him when the event takes place if I’m still on this planet and able to walk.”
Best deal
Looking back over his career, Smurfit cites the takeover of Container Corporation of America in the 1970s as his best deal. "The company went from the second division to the middle of the first division and then we built it up into the top of the first division," he says.
His biggest disappointment? "I wish I hadn't done the Stone Container deal [in 1998] because that led to a whole series of events culminating in us going private.
“We took over that company and found that the assets were extremely tired and required a lot of attention and nursing. That made us go ex-growth for a few years and we were a very fast growing company up to then. The market started to mark our shares down to a low level, which we felt made us vulnerable and we decided then to go private by doing the LBO [leveraged buyout] with [private equity group] Madison Dearborn. I don’t think we would have needed to do that had we not done the Stone deal. I’ve often reflected on that.”
You need a big house to have a collection of a few hundred paintings, which is what I had
These days, Smurfit’s investments are in “young people and family members”.
“I maybe have 15 or 20 investments at any one time. I’m cashing in two or three at the moment. Getting things done is difficult.”
This includes selling the Grand Hôtel au Rond Point des Pistes in Courchevel, France. “I keep myself busy thank God, I don’t know where the days go but they go quickly enough.”
And his extensive art collection is with Sotheby’s in London. “Whether it’s a good time to sell I don’t know but having sold my house [at the K Club] I’ve nowhere big enough to put the art on the walls. You need a big house to have a collection of a few hundred paintings, which is what I had. Some have gone to my family.”
He’d like to be remembered as someone who “built a business with outstanding integrity and honesty and truthfulness” and tried to give something back to society.
“Above all respect for the name,” he says. “That’s very important. Like my father said, it’s like 1,000 footsteps climbing a mountain. It doesn’t matter if they are all good ones, it only requires one bad one and it’s gone forever. The same thing applies in life. One slip in your reputation and you ruin it for all time. You’ve got to make sure you make don’t make that mistake.”
Michael Smurfit on. . .
. . . other Irish entrepreneurs he admires
"I admire Denis O'Brien, Dermot Desmond, I admire JP [McManus] and John Magnier, who controls the bloodstorck industry very well. I think the world of Tony O'Reilly, he was an outstanding man of my generation. Tony Ryan was someone I was very fond of. We shared a jet 50-50 for many years. He had his own aerodrome near the K Club, which I sold him as part of the Lyons estate.
"O'Reilly would be the outstanding brain of my generation. The founding of the Ireland Funds was a very insightful thoughtful thing and one that has been an enormous success."
. . . the future of Northern Ireland after Brexit
“It’s a very complex issue and I don’t think the British government have managed to determine what exactly they’re going to do with the Border. It’s a conundrum. You can’t have one foot in the camp and one foot out of the camp. You’ve got to have both feet one way or the other.
“Will it bring about a united Ireland? No not at this time. It will not. Will it affect trade North and South? It will be affected . . .to some extent. The degree of that extent is what the argument is going to be with Brussels, but there’s going to be some disruption, there’s no doubt whatsoever.”
. . . his decision to live in Monaco
"When I left my first wife and decided to marry Birgitta [1988, they divorced in 1998], Norma Smurfit, who I'm very good friends with still, asked me one thing: 'I don't want you to bring your new wife to Ireland and live here'. I promised her I wouldn't and that's what prompted me to leave Ireland.
“I went to the Isle of Man, to Jersey, to Malta, went to Bermuda, I went to the States and looked around. And decided Monaco was a place I could communicate from. Remember I was still running Smurfit at the time so I had to have an office in Monaco.
“A wonderful office that we sold for €100 million, which I bought for €9 million. I came to Monaco, not for tax reasons because I still paid taxes in America and in Ireland and I still do today. I paid a lot of tax when I sold the K Club even though it was loss making. There were taxes to pay and some millions went to the State. I’ve no objection to paying tax, that wasn’t my reason to come here.”
. . . former neighbour Donald Trump
"I was his second customer for an apartment in Trump Tower, 61AB for 25 years. He was on the 65th floor. I know Donald Trump very well. Before he became president I wrote to him and asked him for my 80th birthday 'would you invite me to the White House. It's on my bucket list'. He wrote back and said he would but he never did. I wouldn't go now because they have the virus there."
. . . advice to entrepreneurs starting out in business
“Be prepared for failure and know that success doesn’t always come your way. Play to your strengths, whatever those strengths are. And don’t be afraid to hire competent people around you. It’s very important to have independent advice and to take it.”
