Inside the world of business
C&C cider thirst rises to new high with Gaymer purchase
AT A time when the State is enduring the worst flooding in recorded history, C&C has decided to expand its exposure to a product particularly dependent on pleasant weather – cider.
Rather than diversifying its current cider-heavy portfolio of brands, the company’s new management team has decided to put all of its recently-borrowed eggs into the one basket.
The company announced yesterday that it is buying the second-largest cider producer in the UK, the Gaymer Cider Company, for £45 million (€49.3 million). This move, C&C says, will strengthen its position within the UK cider market and broaden the scope of its existing cider offering.
The latest data from the Revenue Commissioners revealed that cider sales in Ireland so far this year have contracted by 5.5 per cent.
The Irish market isn’t helped by the fact that we pay the second-highest cider excise duty in Europe, so it’s perhaps not surprising that C&C is now focusing on the UK market.
However, recent figures from AC Nielsen aren’t exactly promising there either – off-trade sales (by volume) of C&C’s UK Magners cider fell by more than 8 per cent during October.
Monthly off-licence sales can be erratic though, and C&C insists that the UK cider market is “an attractive and growing market”.
One wonders then why the owner of Gaymer Cider, US company Constellation Brands, was so keen to exit this market.
According to a posting on its website, the company is now focusing on “premium higher-growth, higher-margin wine, beer and spirits brands” so “it made good strategic sense to sell the cider business”.
If the resoundingly positive reaction of the stock market to yesterday’s announcement (C&C’s price jumped almost 9 per cent on the day) has any predictive qualities, Ireland and Britain are in line for a long-overdue scorcher of a summer in 2010.
Nama haircut gets a trim
AIB and Bank of Ireland played it safe in separate statements to the markets yesterday about their participation in Nama.
They said that it was unlikely that they will suffer any losses beyond the 30 per cent estimated by the Minister for Finance, Brian Lenihan, when he outlined the nuts and bolts of Nama to the Oireachtas in September.
In Bank of Ireland’s case, this seemed to roll back from what the institution itself said the day after Lenihan’s speech.
At that point, it said that the potential haircut it faced on property loans could be less than the Minister’s estimate, albeit while acknowledging that the figure would ultimately depend on the valuation method used.
Analysts have since come up with estimates in the region of 25 per cent.
Yesterday, the bank’s spokesman explained that its original statement in September was based on a number of measurements, including the total value of loans involved and interest roll-ups, which all gave positive indications.
However, he said the bank made it clear at that time that these did not have any relevance to the approach that Nama is going to take when it comes to valuing the loans for which it is going to pay.
Ultimately, the real issue for the taxpayers who are underwriting the rescue plan is this: the bigger the discount that each bank takes, the more likely it is that they will need further cash injections from the exchequer to keep them going.
In that case, we’d better hope that the more optimistic forecasts are the right ones.
Dubai World in the saddle
Troubled Dubai World’s main property subsidiary, Nakheel, yesterday asked Nasdaq Dubai to suspend trading in its Islamic bonds as it continued its quest to deal with $59 billion in debt, and a $3.5 billion bond repayment due next month.
The Dubai government, which owns Dubai World, is seeking to freeze the company’s debts and is seeking a standstill until May on a $3.5 billion bond repayment owed by Nakheel.
Dubai World owes Bank of Ireland €50 million, but the crisis could have an impact beyond that. Dubai is governed by the Maktoum family, who have considerable bloodstock interests in the Republic, including Derrinstown and Kildangan studs, along with other operations.
The country’s prime minister, Sheik Mahommed bin Rashid al-Maktoum, is also the driving force behind Godolphin racing and the Darley breeding business, the banner under which Kildangan operates.
His bloodstock adviser, John Ferguson, told the Racing Postat the weekend that the problems facing Dubai World will not hit his spending on racing, as their finances are totally separate.
One of the paper’s columnists, Steve Dennis, warned over the weekend that if this were not the case, it would be disastrous for the sport in Britain, where the Godolphin operation is based.
Any slowdown in Maktoum investment in racing has the potential to hit Ireland as well. And while Ferguson’s assurances have to be taken at face value, plenty of people involved in the industry here will be watching developments carefully.
TODAY:
Dublin Docklands Development Association chairwoman Prof Niamh Brennan appears before an Oireachtas committee today, a week after the organisation announced it would require State help following its disastrous investment in the former Glass Bottle site. Also today, the quarterly tax defaulters’ list is published by Revenue.
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