Former colleagues at the head of the investment group have different views on future direction, and the upcoming agm should be a lively affair, writes CIARÁN HANCOCK

ON JUNE 16th, in Dublin’s Shelbourne Hotel, One51 chief Philip Lynch met with Gerry Killen, shareholder and former head of his TechRec WEEE electrical recycling business.

Killen, who has €500,000 invested in One51 shares, had been unhappy for some time about the way the investment group was being run.

Along with Limerick-based John Hegarty, a disgruntled shareholder involved in the scrap metals business, and others, Killen was mulling the launch of a campaign for change ahead of the annual meeting on July 28th.

Lynch, a wily businessman, saw an opportunity to head it off at the pass.

At the meeting, Lynch put an offer on the table for Killen to return to the business in an executive role.

Killen made it clear that he would only rejoin if he got a position on the board of One51, where he could try and influence change from within.

Lynch was non-committal. Key Capital, a specialist finance adviser in Dublin, was asked to become involved.

Killen eventually outlined his terms. These included a remuneration package of more than €300,000, a clause in the contract for him to be paid two years’ compensation if the contract was terminated within 12 months, a position on the board and a senior executive role that Lynch would publicly acknowledge.

The terms were tasty, but Killen felt he had to put in place a safety net in the event of a falling out.

According to Killen, there was silence from One51. "There has been a deafening silence since then," Killen told The Irish Timesthis week. "Look, he thinks he can divide and conquer."

Lynch proposed a similar meeting with Hegarty last week in Portlaoise, but this never took place.

Last weekend, Killen, Hegarty and others pressed the button on a media campaign to win support for their bid to secure three seats on the One51 board and effect a change of strategy at the company, which has investments ranging from environmental waste to the Irish Pride bakery group and ferry operator Irish Continental Group.

They claim to have about 20 per cent support from shareholders, including the Co-operative in the UK, one of One51’s biggest shareholders.

The gloves are now off in what is shaping up to be one of Ireland’s messiest corporate spats.

Ironically, the Shelbourne will be the venue for One51’s annual meeting when Lynch and Killen will next come face to face.

There was a time when Philip Lynch was the darling of the Irish stock market.

From the late 1980s, he transformed IAWS from a boring agri-business into one of the fastest-growing consumer foods groups in the world.

His style of business meant he wasn’t everyone’s cup of tea, but he delivered the returns to shareholders in spades.

“Philip could rub some people up the wrong way but he did a brilliant job with IAWS,” said one fund manager this week, who asked not to be named.

Lynch’s €65 million acquisition of Cuisine de France in 1997 proved to be a transformational deal for IAWS, with the par-baked bread products proving a big hit with Irish consumers, who were beginning to enjoy the fruits of the Celtic Tiger.

Lynch stepped down as managing director in 2003, taking on the role of chairman for a brief period.

IAWS has since morphed into Aryzta, a Swiss-based food group run by Lynch’s successor Owen Killian, with some parts of the business spun off into Origin Enterprises, an Irish-listed entity.

Earlier this decade, with the Irish economy booming and funds freely available, Lynch decided to try and repeat the trick, turning the IAWS parent, the eponymous IAWS co-operative, into what is now One51, a public company whose shares are traded on the grey market.

It has had some success with its shareholding in infrastructure group NTR, but its multimillion investment in ICG is under water after two failed bids for the company, and its attempt to take over listed waste group Augean in the UK has run into the sand.

Plans to pull together a cohesive environmental services division are still only taking shape.

The collapse in global financial markets and the recession here put the kibosh on any plans for an IPO, while its share price on the grey market has slipped to below €2 recently.

Davy recently valued the stock at €4.30 in a note to clients, but extracting this value in the current climate will be virtually impossible.

Sources close to the company argue that the external environment has simply put the brakes on its growth, but that most of its businesses are sound and will bear fruit given time. ICG, for example, has paid it dividends of €9 million to date.

It’s almost five years since Killen brought TechRec to One51 as an investment opportunity. It was involved in the recycling of electrical and electronic goods, as stipulated by new legislation.

Lynch liked it and bought the business, giving Killen the scope to expand to Canada, Switzerland and elsewhere.

In March 2008, the two parted company by mutual consent. In June 2009, Lynch wrote a reference for Killen, stating: “We acquired Gerry’s shareholding in TechRec Ireland in April 2008, when he left One51 to focus on a new business project.”

Now, more than two years on, Killen is leading a campaign for change in the way One51 is run.

Concerns regarding the group include a lack of investment returns; a lack of financial transparency; numerous management departures; overall lack of strategy and focus, and a failure to communicate adequately with all shareholders.

They are also questioning a €4.96 million tax-free patent payment made by One51 subsidiary Protech Performance Plastics Ltd, which ended up with a company called Chandela Nominees.

No mention of this payment is made in One51’s accounts and the dissident shareholders want to know where the money ended up, and who benefited from the disbursement of this money.

Killen also highlights how Lynch’s remuneration is not revealed in the annual report. The 2009 accounts, circulated recently, put executive remuneration at €2.7 million.

Killen estimates that Lynch is earning more than €1 million a year.

He characterises One51’s environmental division as a “medley of disparate niche businesses in Ireland and UK, from animal rendering, through skip hire, hazardous waste management, glass bottle and paper and cardboard recycling, metals trading and recycling, plastic product manufacturing and many more”.

He suggests refocusing the business into a green-tech/clean-tech operation with an “orderly disposal” of non-core assets over time.

“This is nothing personal. I believed in the man. My only concern is to restore value and generate liquidity. I’ve €500,000 of my own money invested.”

Earlier this week, One51 dismissed Killen’s comments.

“One51 is not surprised that Mr Gerard Killen is trying to win support for his role as a dissident shareholder.

“Mr Killen worked for One51 from 2005 to 2008 in a senior position in our WEEE (waste electrical and electronic) division.

“During that period, he was responsible for a number of acquisitions in the WEEE sector.

“These acquisitions came at a considerable cost to One51 and the company incurred losses of €27 million.

“It is regrettable that Mr Killen is now engaged in a campaign against One51 because the Company would not reinstate him to a senior position.”

The company has said it will deal with all issues presented to it at the agm.

It promises to be a lively affair. Lynch has been busy shoring up his support.

But Killen won’t rest until he has some answers. “If necessary, we’ll call an egm,” he said. “I’m merely the conduit reflecting the serious unrest out there.”