Three American hedge funds, and a bunch of Irish entrepreneurs bought a significant piece of Seán Quinn’s original business empire ten years ago, for approximately €98 million, in what appeared to be an excellent purchasing agreement at the time. Hedge funds Brigade Capital, based in New York, and Contrarian Capital and Silver Point Capital, both Florida-based, were existing creditors to the broader Quinn Group. This organization was appropriated by the Anglo Irish Bank three years prior while trying to recover a debt of €2.88 billion from the Quinn family. The hedge funds contributed €103 million in loans to fund the deal, including costs.
The acquisition included Quinn’s previous cement, construction material enterprises, and a packaging division, which initially unified to form a company known as Quinn Industrial Holdings (QIH). The hedge funds held 78.6% equity shares in QIH, which was later rebranded as Mannok Holdings four years later. The remaining 21.4% was mostly given to three Irish entrepreneurs, John McCartin, Ernie Fisher and John Bosco O’Hagan, who were instrumental in striking the deal, while a small portion was given to management headed by Liam McCaffrey, Dara O’Reilly and Kevin Lunney.
The first accounts for QIH in 2014 revealed a “negative goodwill” or “badwill” of €37.7 million tagged to the deal when it was bought. This is an accounting term to describe assets purchased below their underlining value.
However, keeping the business afloat proved to be a more difficult task for the hedge funds and the Irish partners. This week, they agreed to sell Mannok to Turkish building materials company Cimsa in a deal worth €330 million.
Seán Quinn was initially hired as a consultant by the current stakeholders on a contract worth €500,000 per year in 2015 after he came out of personal bankruptcy. However, this contract was terminated in May the following year due to a conflict with his former management team. Further vandalism attacks on former Quinn Group assets re-emerged and peaked with the 2019 kidnapping and assault of Kevin Lunney, QIH’s chief operating officer.
The past tycoon has continuously refuted any participation in any assaults or threatening behaviours. This has thankfully diminished recently, enabling Evercore Partners – an investment firm commissioned two years prior to discover potential new investors for Mannok which is grappling with enormous investment to cut carbon emission – to procure a steadier ownership group than a collection of American financiers.
The rise of a robust trade buyer signifies a significant forward step, reinforcing hundreds of jobs in the otherwise overlooked border region that spans Cavan and Fermanagh.
Umut Zenar, the CEO of Cimsa, pledged this week to generate new job prospects in the vicinity, backing Mannok’s continued growth and forecasting business extension across Europe.
Over the past decade, under its existing proprietors, Mannok has allocated more than €100 million to capital expenditures. During this period, earnings almost doubled to €312 million, whilst earnings before interest, tax, depreciation and amortisation (EBITDA) grew sevenfold, reaching nearly €45 million. The total workforce has grown by 20% to 800.
The firm’s debt over the same period reduced by 30% to €66.8 million. Deducting this from the €330 million business valuation of the Turkish deal leaves an equity assessment for Mannok of just over €260 million.
Quinn alleged a betrayal by the business community and administration team that executed the 2014 agreement, seemingly expecting to recover ownership of Mannok eventually.
However, the pioneering entrepreneur, who set off his journey in Derrylin in 1973 with a £100 loan, extracting gravel from his small family farm and went on to establish a multi-billion euro conglomerate spanning cement to insurance, forfeited any such entitlement when his family failed to fulfil obligations amounting to €2.88 billion due to Anglo Irish Bank during the fiscal crash.
The majority of these loans were used to back a leveraged investment taken by Quinn in Anglo Irish Bank between 2007 and 2008. This investment vanished as the bank’s shares plummeted amid the financial turmoil, leading to nationalisation.
The loans leveraged by Mannok from its hedge fund proprietors, accruing a 10% interest rate, had dropped to €52.3 million by the close of 2022. After persisting for the past 10 years and even supporting the company’s expansion, the three investment companies will gain €205 million from their interest in the Turkish transaction. Such an outcome is a well-deserved reward for them and the remaining stakeholders.
McCaffrey, Fisher, and O’Hagan are each set to receive nearly €14 million whilst McCaffrey, who relinquished his position as Mannok’s CEO at June’s conclusion, is estimated to gain €6 million from his shares. O’Reilly, who succeeded McCaffrey, has holdings valued at €4.6 million as per company’s latest financial records.
It is, however, anticipated that O’Reilly, Lunney, and other continuing executives will retain most of their stocks in the agreement with the Istanbul-listed Cimsa. The deal will ensure that the local management sustains a 5.3 per cent stake. Despite the proceeds, it’s apparent that they don’t fully compensate the management team for their endured experiences.