Driving deals on the tee – from the golf club to the racecourse
Michael Smurfit: Sporting connections
Michael Smurfit with Tiger Woods and Mark O’Meara
Michael Smurfit was a keen sportsman as a boy and this interest continued as his wealth grew. He acquired Straffan House in the 1980s for £3.5 million with the idea of turning it into a country club.
It started out as a “personal deal” and he raised £5 million from 50 friends by selling them “golden memberships”.
This entitled them to membership of the country club for 50 years with no dues.
However, the 1989 stock market crash made memberships harder to sell.
Smurfit says in his book that Robert Holmes, the Smurfit Group’s chief financial officer, told him in 1989 the company was negotiating with the government about tax-related job-creation proposals. The Irish economy was in the doldrums and the government was anxious to create jobs.
Holmes said if the Jefferson Smurfit Group (JSG) invested in the K Club and created jobs, it could qualify for the job-creation scheme. This would allow it bring between £70 million and £80 million back to Ireland to distribute to shareholders in return for the K Club creating 150 permanent jobs. Smurfit earned most of its profit outside Ireland but kept them offshore because of the Irish tax regime.
Over the next 10 years, JSG invested €150 million in the club, not exactly a core activity for a paper and packaging company.
Smurfit claims that ultimately the K Club cost the company nothing when you add up the gains it made first from tax reliefs and then from the €115 million he paid for the K Club in 2005, with developer Gerry Gannon.
In A Life Worth Living , Smurfit tells in detail the story of how the K Club went on to secure the 2006 Ryder Cup. His company’s sponsorship of the event was a vital factor in securing the deal, he says, but his deal-making ability was too.
“Getting it was a hard task. Ken Schofield [executive director of the PGA] was a very, very tough negotiator. When I clinched the deal in Annabel’s [a London nightclub] that night, I breathed a sigh of relief. I knew it was going to come to Ireland and I knew we were in the favourite position, but you never know.”
Asked to choose one memorable moment from the Ryder Cup he said: “I don’t think there could be any more memorable moment then standing on the first tee with Tiger Woods, who I knew very well and is a good friend.
“He drives the ball into the water at the K Club which is what it’s there for. That made me proud. The world number one has just driven the ball straight into the Smurfit pond! Ah great! That put me on a high all day.”
Smurfit slept only fours a night during the event, which was nearly wiped out at the start by a sudden storm. “I was so knackered that week, if you look at me, I look years older than I do today.”
Smurfit says he now realises the tournament was perhaps the “apex of the Celtic Tiger”.
“Just after that the whole thing fell apart. The moment was right, you probably couldn’t sell the same number of tickets at the same price today,” he said.
When Ireland’s property bubble burst, Smurfit was forced to pick up the bill to keep the K Club going as his partner Gannon was no longer prepared to support it.
Eventually Smurfit acquired the debts of the club from the National Asset Management Agency for an undisclosed sum in 2012.
Today the Smurfit family would like to invest more in expanding the K Club, he says, but he would like Kildare Country Council to first reduce its rates.
“I am very near to making a decision on that,” Smurfit says. “A lot depends on getting rates back. The rates were valued when the place was worth twice or three times what it is today. The council has to come back and be more realistic about the rates before we consider spending more money.”
Smurfit says he was never a serious punter but he let slip that a young JP McManus was his bookie many years before he became a billionaire.
Smurfit writes of McManus: “He’s now one of Ireland’s leading businessmen, which maybe tells us it’s wiser to be the person who takes the bets than the person who places them.”