One more thing

Little to elate Elan shareholders; ICG board must stick or twist; PR industry has a hard sell

Elan chief sugars the pill by waiving annual bonus

UNLIKE MANY of his counterparts in the financial sector, Elan chief executive Kelly Martin last year waived his annual bonus “in respect of the company’s performance”, according to a document filed recently with the Securities and Exchange Commission in the United States. This was in spite of the board’s “very positive assessment of Mr Martin’s performance for the year”. We’re not sure Elan shareholders would see it that way, given the share price has collapsed from more than €23 a share in October to trading at just above €4 a go.

The loss-making Dublin-based company is also carrying debts of $1.7 billion due in November 2011 and there are concerns about the long-term commercial viability of its Tysabri drug. In January, Elan said it was reviewing its strategic options. Martin still pocketed a not inconsiderable $806,154 in salary and fees, a pension contribution of $6,750 and a benefit-in-kind payment of $17,772. His total package in 2007 was worth $1.96 million, a year when he waived a cash bonus in favour of stock options.

Martin’s decision to pass on his bonus last year made him the second-highest earner at Elan. Chief financial officer and head of Elan Drug Technologies Shane Cooke was paid $1.12 million. This included a salary of $624,078 and a bonus of $414,000. Cooke also received a $73,485 pension contribution and a benefit-in-kind payment of $12,652.

In total, the non-executive members of Elan’s board were paid $3.1 million between them last year, less than half the $7.8 million they earned in 2007. The previous year’s figure was skewed by a $2.5 million severance payment to former director Lars Ekman. Chairman Kyran McLaughlin earned a handsome $300,000 in fees for his part-time role.

Former AIB finance chief Gary Kennedy was paid €80,000 while ex-IDA Ireland boss Kieran McGowan got €76,250 – $12,106 less than in 2007. Anglo Irish Bank’s executive chairman Donal O’Connor earned €38,093, having only been appointed in May of last year. The 20-F document sheds little light on the likely outcome of Elan’s strategic review.

“We are committed to completing this review of potential alternatives as promptly as practicable; however, there can be no assurances that any particular alternative will be pursued or that any transaction will occur, or, even if a transaction does occur, that it will be on terms favourable to us.”

ICG may have to ship big loss if Moonduster tables lower bid

IT NOW looks like the next three weeks could decide the fate of Irish Continental Group. That timeframe should see Eamonn Rothwell and Moonduster finally table their offer for ICG at a level up to €15 a share.

It will then be up to the board of the ferry operator and property developer Liam Carroll to stick or twist. The board and its advisers are unlikely to be thrilled with an offer of €15, given that the share price is already trading at just below that level and that a bid of €24 was rebuffed in 2007. It might well balk at recommending what it deems to be a low bid.

We live in changed times, however, and with passenger, car and freight traffic all declining, financing for deals hard to come by and stock markets depressed, a bid of €20 a share or more was always going to be a stretch.

If a bid were not to be recommended, it would then be down to Liam Carroll and some of the large institutional investors to decide whether or not to sell. Carroll is believed to have borrowed about €200 million from AIB to purchase his ICG shares at an average price of about €24.

He would be taking a significant hair cut by accepting €15 a pop although it is not clear what recourse is in place in relation to this loan. Ironically, AIB is one of four banks preparing to back Rothwell and Moonduster’s bid.

Sandell Asset Management, which owns 6 per cent of ICG, is believed to be a willing seller. Sandell gambled on ICG two years ago, buying contracts for difference from Deutsche Bank, and is now thought to want to liquidate its position.

Of course there is always a possibility of a rival bid emerging but this seems unlikely given that Mr Rothwell and Moonduster own 41 per cent between them. Their ace card in persuading shareholders to take about €15 a share might ultimately be the possibility that the share price would collapse if a bid were rejected.

Aer Lingus, which also has a tightly-held share register, has already suffered that fate since Ryanair pulled the plug on its last offer. Other shipping companies have suffered on the stock market with Maersk down 60 per cent in the past six months and Carnival off 46 per cent since August.
Where ICG's share price would go nobody knows but investors might not get a better opportunity to sell for a long time.

Spin doctors on call to defend their jobs

LAST MONTH we told you how Ireland's top spin doctors have decided they needed to work on their message if they are to stop the haemorrhaging of lucrative Government PR contracts.


Gerry Davis, chief executive of the Public Relations Institute of Ireland (PRII), wrote to members at the end of February to inform them that he was seeking a meeting with Taoiseach Brian Cowen and other party leaders to put across their case.

He asked members to fill in an anonymous and confidential survey in relation to staff numbers, salaries and business in general to help make their case.

Judging by the results, 2009 is going to be a tough year for the PR industry here. According to a summary of responses, which The Irish Times has seen, just under 70 per cent said they expected their fee income to decline this year, compared with 12.1 per cent who think it will rise.

Reductions of up to 40 per cent are expected by some respondents.

In relation to their profit margin, 66.7 per cent expect it to decline and 12.1 per cent think it will rise.

A majority of firms said they had laid off staff in the past six months due to "adverse general trading", with cuts of up to 50 per cent reported by some PRs.

In terms of pay, cuts of up to 10 per cent have been implemented by some firms. Just over a third of those who replied to the survey had implemented a salary cut for all staff, with 62.5 per cent freezing salaries.

PR services have been in the front line of cuts in Government spending of late. Davis is hoping the results of the PRII survey will lead to a change in attitude when it comes to exchequer savings.

It will be a hard message to sell with a harsh budget and increased taxes just around the corner.