Messy divorce beckons at Mercantile pub group

Caveat: marriage breakdown, devilish Eir figures and how windy pigs boost exports

 

The formal divorce is still being negotiated, but it appears the marriage between Frank Gleeson’s Mercantile pubs group and Capital Bars, backed by the Setanta Sports founders via Danu Investments, lasted exactly one year to the day before breaking down.

Company documents reveal Gleeson sold his shares in many of the various companies that controlled his pubs, such as the Mercantile on Dublin’s Dame Street, to a Danu-backed vehicle on December 23rd, 2015. Exactly a year later, it is understood, his new business partners tried to remove him as group chief executive following a series of bitter and complex rows, which spilled out into two Sunday newspapers last weekend.

Happy anniversary, love. And a happy Christmas too. By all accounts, it is a stormy relationship.

As is common in many marriages, one side took the other’s name. Following the merger, the Capital Bars moniker was ditched and the enlarged Mercantile group was born, comprising 12 outlets including the George, Café en Seine, Opium, Pichet and Whelan’s on Wexford Street.

It is understood from several sources that Gleeson is not currently overseeing operations day-to-day across the group. But he remains, on paper, chief executive of the enlarged business, in which he controls a stake of more than a quarter.

A minority stake of less than 15 per cent is controlled by Danu, comprising Mark O’Meara and Setanta founders Leonard Ryan and Mickey O’Rourke. The rest is controlled by a combination of Irish-born, US-based construction magnates, Michael Breslin – who made $100 million from a scaffolding business in the US – and Maurice Regan. Breslin has separate interests with Danu.

Breslin’s EMI Capital group has the biggest Mercantile stake, and it is with Breslin that Gleeson appears primarily to have fallen out. It is understood that O’Meara and an EMI executive are, for now, overseeing group operations while the divorce is being hammered out.

One source said cracks started to appear in the relationship late in the summer, with disputes over operational, strategic and financial issues.

The relationship really began to break down around October, it is understood. In November, Gleeson sought to have liquidators appointed to several legacy companies.

It is understood that EMI-MR, a company linked to the US investors, separately provided finance to Gleeson in relation to suburban Dublin pubs that he owned outside the Mercantile group. These included Páidí Óg’s pub in Mulhuddart and Bottom of the Hill in Finglas, both on the market. Bottom of the Hill, which Gleeson sought more than €1.7 million for, is under offer.

David Drumm

A dispute arose between EMI-MR and Gleeson over this finance deal, resulting in a demand for payment from Breslin’s company. It has since filed a summary debt action against him in the High Court. He has yet to file a defence. Parallel to this, relations were breaking down between Gleeson and Breslin inside the Mercantile group over serious strategic and financial disputes.

Gleeson remains one of the most prominent publicans in the State, and the name carries status in the industry. Even while he was rowing with his co-investors, members of his family were expanding their roles in the pub sector elsewhere. Using a vehicle, Premium Venues, Gleeson’s sons, one of whom has worked in Mercantile, bought the Mantra Bar in Maynooth in September. That deal was part financed by M&J Gleeson, the distributor owned by Bulmers cider maker, C&C.

Back at the Mercantile group, separation talks continue. Control appears to rest in an entity called Ardan Advisory, on whose board Gleeson sits alongside O’Meara, Ryan and Gleeson’s long-time associate, Ciara Fox. Interestingly, one of the directors here is also listed as US criminal defence attorney, Russell Gioiella.

Gioiella is one of the lawyers retained by former Anglo Irish Bank chief executive, David Drumm, in his US bankruptcy proceedings in Massachusetts, court documents show. Drumm is closely linked to Breslin, who has given him office space and consultancy work, and who previously borrowed from Anglo. Breslin is currently embroiled in court action with Nama over those loans.

A Dublin accountant is also said to be indirectly involved in the group. Grant Thornton, the financial services firm, was one of the advisers on the original deal to merge Capital and Mercantile. In recent months, Patrick Burke, a former GT partner, became a director of EMI, it is understood. His LinkedIn profile appears to back this up.

What now for the State’s second-biggest pub group? It is understood that it recently sold the Howl at the Moon venue on Mount Street to Paddy McKillen jnr, who runs the biggest Irish pub group, Press Up Entertainment.

Options on the table for Gleeson and his co-investors include either side buying the other out or, more likely, some sort of asset swap and a splitting of the group. Talks are ongoing. Seeing as the first anniversary wasn’t such a happy occasion, might matters reach a conclusion before Valentine’s Day?

*******

Footnotes . . .

- They are clearly not a superstitious bunch over at Eir, the State’s biggest telco. It released solid interim results for the six months to the end of December on Thursday. Underlying revenues were recorded as €666 million. What, 666, the mark of the devil? Hopefully this isn’t an omen for Eir’s future performance.

Richard Moat, chief executive, appeared nonplussed when its rather spooky sales figure was pointed out to him: “I heard somebody mention that, alright. It’s pure coincidence.”

If it were me, I’d happily ditch a million or two of revenue simply to avoid the return of the anti-Christ at my mobile phone and broadband operator.

Moat was also nonplussed about recent reports suggesting he and his management team could be in line to receive a payout of more than €180 million if the company floats, as expected, in about two years.

“Don’t believe everything you read in the papers,” he said. The cheek of him.

Moat disputed the rationale for the figure but, interestingly, he didn’t deny outright that management could receive a payout of this magnitude.

- Finance firm Investec brought together a group of the biggest names in the Irish food industry at the Merrion hotel in Dublin on Monday for a presentation by Adam Couch, chief executive of Cranswick, the listed £1 billion-a-year (€1.17bn) British pork exporter. Or so a snout told me.

Cranswick is now one of the biggest food producers in Britain. Couch apparently regaled his Irish audience with a (curly?) tale about how his business conquered the Chinese market, which is driving growth at the group.

You see, the Chinese love pork. And not just the lovely chops. They also devour trotters, ears and all the other bits that consumers on this side of the world are less enamoured with.

But pigs have a gas problem. Chinese demand for pork was growing so strongly that the number of pigs required was having an impact on the communist state’s efforts to meet greenhouse gas targets. The Chinese now look to import some pork, hence the opportunity for Cranswick.

The Irish food sector is looking increasingly to Asia for future growth. The need for Ireland to build new trade alliances elsewhere will only become more acute given the protectionist stance of US president Donald Trump.

Couch said it took him five years to crack exporting into China. All together now: this little piggy went to the market, this little piggy stayed at home . . .

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