Inside The World Of Business

Replacing Lynch might be harder than getting rid of him

THE DEPARTURE of Philip Lynch from One51 was not unexpected. Rumours of board dissent had abounded for weeks, and with Lynch due to meet shareholders face-to-face at the company’s annual meeting next month, the prospect of a re-run of last year’s corporate skirmishes were all but guaranteed.

While Lynch’s dismissal brings some sort of resolution to a simmering issue, One51 has arguably more serious issues to consider. The ousting of Lynch may bring short-term satisfaction to some disgruntled investors, but the issue of the company’s strategic future remains. Central to this is the appointment of a new chief executive. The distinct lack of succession planning at a company which had become synonymous with its chief executive is something for which the board must take responsibility.

A change in investment strategy will also have knock-on implications. Analysts have already been mulling the implications for Irish Continental, the company in which One51 is a 12.5 per cent shareholder.

Meanwhile, Lynch’s plans are anyone’s guess. Suggestions that he may seek support of co-op shareholders and launch a bid for the company look highly unlikely, with finance one of the main barriers. His own personal financial situation is also an issue. Nonetheless, his level of support should not be underestimated, as indicated at the last C&C annual meeting, when a relatively small number of proxies were cast against Lynch’s reappointment as director.

With One51’s accounts due to published within the next few weeks – they were signed off by the board last week – the next step for the company will be the annual meeting.

How shareholders will react to Lynch’s dismissal, and the dramatic devaluation of their shareholdings, will be interesting. Ousting Lynch might be the easy bit. Rebuilding the company will be the real challenge.

Flexibility over Greece is good news for us

THE OFFICIAL line that whatever method is eventually found to involve the private sector in the second Greek bailout has no direct bearing on Ireland is slowly unravelling.

Eamon Gilmore told the Institute of International and European Affairs yesterday in respect of the French plan to bail-in bondholders that: “Whether that approach can be generalised for more than French-held Greek debt is yet to be tested . . . What it demonstrates, however, is that we can, if we try, find innovative ways to deal with indebtedness in Greece, without provoking unintended consequences. What is also important is that, in finalising a solution for Greece, there is effective communication of the implications, if any, for other programme countries.”

This would appear to be a pretty clear signal that, if the Greek plan can be made work, Ireland will follow suit. This of course makes perfects sense. Indeed, some would hold that it is inevitable.

Yesterday’s exchequer returns confirmed that Ireland is managing to adhere to the terms of its bailout, but is no closer to its goal of returning to the bond markets than it was last November. The reason is that our debt is simply too big and the market believes some sort of restructuring is needed to return it to a sustainable path.

The good news from the Irish perspective is that the more effort that goes into finding a way to restructure Greek debt without triggering a default or any unintended consequences, the more likely that some sort of imaginative solution will be found for Ireland.

Something that draws a distinction between the debt related to the banking crisis and sovereign debt proper would be nice, as it would play better in the markets, but the real issue is one of quantum.

For the time being it may still suit the Government to talk down any question of an Irish restructuring, but as Gilmore would appear to have realised there comes a point when people just stop believing you and the bigger risk is of looking foolish.

Merrion medicine seems to be having little effect

MERRION PHARMACEUTICALS appears to have found itself at a difficult juncture. Just weeks after parting company with John Lynch, the firm has announced a “thorough evaluation” of its pipeline.

Lynch resigned suddenly in May. His successor is the group’s former chief financial officer, Jonathan O’Connell. The back-to-square-one assessment of the group’s portfolio is the the first announcement of note from the company since then. It was accompanied by news that Merrion had secured $5 million in debt funding. However, it will be paying 12.45 per cent per annum for the privilege – steep even in these turbulent times for lending. The US lender will get further payments if the money is paid early and is also in a position to secure an equity stake in the business as a result of the transaction.

News of the “thorough evaluation” was accompanied by the need to assess “the best alternatives to enhance shareholder value through better use of the company’s considerable asset base”.

At its most generous, this signals a concern over recent strategy at the group. It would appear that all is not running smoothly.

TODAY:

The ongoing battle between the former Anglo Irish Bank and the Quinn family over control of family assets resumes in a Stockholm courtroom.

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