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Irish equities: Is the Irish market too small?

05th July, 2019

Just as the one-year anniversary of the infamous bid for Smurfit Kappa by International Paper is marked, Mergers and Acquisitions (M&A) in the Irish market is once again at the forefront of conversation, with recent activity from Independent News and Media, Green REIT, and Kingspan all happening in April alone. Is it something in the water or just seasonality? Well, in actual fact studies show that uncertainty can drive an increase in deal flow, and with Brexit, trade wars, and currency issues all overhanging markets at the moment, it’s probably no surprise that we are seeing marked M&A activity this year. We look at the recent timeline.

4th April 2019

Independent News and Media announced that it had ‘received an approach in relation to a possible offer for the company’. On the 30th April the company announced that it had received a firm bid from a Belgian company, Mediahuis, for 10.5 cents/share, with the two major shareholders (Denis O’Brien and Dermot Desmond) undertaking to sell their collective 44.9% stake. With the scheme meeting having taken place on the 26th June, the takeover looks set to go ahead.

15th April 2019

The co-founders of Green REIT announced that it was for sale. This news took the market by surprise, as the stock was only listed a relatively short time ago in 2013. Given the attractive assets Green REIT holds, particularly in the logistics space, there is strong interest in the company.

16th April 2019

Kingspan announced that it had made an offer to the board of Recticel, a Belgian multinational company, to acquire its entire Insulation and Flexible Foams divisions for a total consideration of €700m. Recticel, however, unanimously rejected the offer on the 26th April, and that would appear to be that for now. However, Kingspan typically engages in M&A activity during any given year, so we may get further M&A announcements at a later date.

So where could the next M&A activity come from?

Well, DCC completed an equity raising of £600m on 2nd October 2018 but has spent only £90m on acquisitions since this raising, therefore it seems quite likely that we will hear some activity from the company soon. In the meantime, with Brexit uncertainly raising its head again, undoubtedly some companies will see it as an opportunity for consolidation.

As always when we have seen a period of M&A and delistings from the Irish market, some conversation has turned again to whether the Irish market has a long-term future, or if it is too small to be sustainable. It’s an old discussion: when I started out in the Irish market 20 years ago, I remember similar deliberations. At the time Elan, a drugs company, was the biggest and most hotly debated name on the Irish market. As time progressed Elan first shrank and then delisted, but the Irish market continued to function. So too in Ireland, we may lose Green REIT and Independent News & Media, but this should make way for other opportunities in the course of time.

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