Cantillon: Smurfit faces pesky shareholders at John Menzies

SVM shouldn’t think they’ve got an acquiescent chairman at helm

Dermot Smurfit’s new gig won’t be all it’s cracked up to be if some upstart shareholders get their way.

The businessman - kid brother of Michael and father of gambling entrepreneur Dermot Jnr and actress Victoria - was named this week as chairman of troubled Scottish logistics group John Menzies.

Following a 57 per cent slump in pre-tax profits in the past two years to £18.2 million (€21.8 million), it emerged earlier this month that an activist German investor, Shareholder Value Management (SVM), which had built up a 7 per cent stake, had told the company it should split the group in two.

Demerging John Menzies’ newspaper and magazine distribution unit from its airport baggage and cargo handling business would unlock some value for shareholders, according to SVM. It follows on from similar break-up calls from Swiss investment firm, Lakestreet Capital Partners, which also argued that each of the businesses would attract a “dramatically” higher valuation cut off from the other.

John Menzies had already been through the wars before SVM raised its head - having lost its chief executive, chairman and chief financial officer so far this year. Perhaps the German investor decided to strike when it was in a weak position.

Already, in appointing Smurfit, the company has bowed to one the key demands of SVM, which had called for interim chairman Dermot Jenkinson to be replaced.

Smurfit, a former deputy chairman of Jefferson Smurfit (now Smurfit Kappa) and current chairman of Finnish paper and packaging company, Powerflute, which he bought in a distressed state in 2005, will have his work cut out steadying the ship at John Menzies.

However, SVM shouldn’t think they’ve got an acquiescent chairman at the helm.

Before Jefferson Smurfit was taken over in 2002 by US private equity firm Madison Dearborn, the top brass at the company paid little heed to pesky investors. Ask anyone who queried the appropriateness of the group’s investments in the K-Club golf and leisure complex in Co Kildare and severely criticised executive remuneration at annual general meetings back in the day.