Is it a matter of time before Iseq laggards attract attention of ‘blank cheque’ brigade?

Market Beat: There is a limit to Kingspan self-flagellation over Grenfell, it seems

Shares in fruit and veg group Total Produce are looking somewhat plumper since the company revealed last week that it is merging with Californian peer Dole.

A full-on tie-up between the two companies to create the world’s largest fruit supplier – following Total Produce taking an initial 45 per cent stake in Dole in 2018 – will lead to obvious cost savings and other synergies and a stronger balance sheet, as the combined group aims to raise additional equity.

But it's hard to ignore a big reason why shares in Total Produce, a spin-off from Fyffes back in 2006, have jumped as much as 47 per cent since the announcement: the fact that it is abandoning its Irish stock market listing in favour of the bright lights of Wall Street.

An initial public offering (IPO) of the new group, Dole plc, is now being planned.


The problem with a concentrated stock market such as Euronext Dublin is that major international investors only need to buy six names – CRH, Kerry Group, Flutter, Ryanair, Smurfit Kappa and Kingspan – to have exposure to most of the Iseq. Most companies on the market have a market valuation of below €1 billion, which keeps them off the radar of many overseas analysts and fund managers.

That hasn't stopped private equity or trade buyers. In December, US investment giant Blackstone joined forces with fuel forecourt retailer Applegreen's founders, chief executive Robert Etchingham and chief operations officer Joseph Barrett, to mount a €718 million bid for the company – marking a 48 per cent premium to where it was trading beforehand. The deal is set to close early next month.

Recruitment firm CPL Resources exited the market last month, after more than three decades, as Japanese group Outsourcing finalised a €318 million takeover of the company. That represented a 36 per cent premium to the company's valuation before news of the deal emerged in early November.

"US-centric private equity investors, in particular, have enormous firepower and access to inexpensive debt currently. They are marauding across Europe, including Ireland, seeking cash generative companies trading at low absolute earnings multiples," said Joe Gill, director of corporate broking at Goodbody Stockbrokers; this was notwithstanding a recent uptick in market interest rates, or bond yields, internationally amid inflation concerns.

They are not alone. A record $83 billion was raised last year through the IPOs of “blank cheque” companies in the US, offering investors little more than a vague plan that their promoters, trading off previous corporate successes, will find good deals.

The so-called special purpose acquisition vehicles (Spacs) craze, fuelled by cash looking for homes as central banks supplied cheap money during the Covid-19 crisis, was tapped this week by Dublin financier Paul Coulson.

The Ardagh Group boss announced plans on Tuesday to secure a separate New York listing by merging the company's fast-growing beverage cans unit with a Spac, called Gores Holdings V, which raised $525 million (€429 million) in IPO last August.

It’s a clever bit of financial engineering, given how equity investors seem to prefer this business to Ardagh’s legacy glass operation, which appears to be weighing on the group’s market value. Shares in Ardagh Group have since spiked in the hope that its stock market investors will be swapped into the new company.

Some Irish finance figures have also been involved in the setting up of Spacs in recent months, as the hottest trend on Wall Street continues.

Irish packaging industry veteran Patrick Doran and corporate financier Gary Quin floated a company called North Atlantic Acquisition Corporation on the Nasdaq in January after raising $379 million from investors, with the notion of buying a European or North American company in the "consumer, industrials or telecommunications industries" within 24 months.

More recently, Irish natural resources and property veteran John Carr has emerged as a founding director of a Spac that filed with US authorities this month to raise up to $300 million in an IPO.

Is it only a matter of time before some Spacs, scouring the globe for deals, turn their attention to unloved names in Dublin?

Kingspan’s Grenfell remorse extends so far

The part of Kingspan’s annual statement earlier this month referring to the 2017 Grenfell Tower fire had a written-by-committee flavour to it, as it apologised for “serious issues” linked to the use of its products in the London high-rise apartment block.

About 5 per cent of the insulation material used on Grenfell’s facade was made up of Kingspan’s Kooltherm K15 product. The rest was supplied by a rival. And Kingspan says it had no role in the design of the cladding used on the tower.

Still, public hearings about the fire have heard evidence of Kingspan staff at its UK insulation boards business joking about submitting different material for K15’s authorisation for use in high-rise buildings than was actually sold.

“These issues relate to unacceptable employee conduct at its UK insulation boards business, and historical process shortcomings by this business,” Kingspan said in its earnings release. “Kingspan apologises unreservedly once again for these shortcomings which are not consistent with its values or its commitment to conduct its business to the highest safety standards.”

But there's a limit, it seems, to the corporate self-flagellation. Kingspan revealed in stock exchange filings this week that it has issued a total of more than 63,800 stock options to CEO Gene Murtagh and three other top executives. They are due to vest in three years subject to certain performance conditions, but at today's prices, they're worth about €3.86 million.