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Given the company’s history, the challenges faced by chief executive Alan Walsh over the last year to move One51 towards a stock-market flotation must seem like a small bump in the road. But with billionaire financier Dermot Desmond offloading his stake in the business last week, One51 may finally have a clear run to list on the stock market.
While a number of years in the making, an initial public offering (IPO) of shares in One51 has long been on the cards, with Walsh indicating to the Irish Farmers Journal as far back as 2014 that he intended to move the company onto the stock market. “We need to evolve from this grey market we operate in now because it doesn’t work today,” Walsh said at the time.
Transforming One51
Since 2011, Walsh has set about transforming One51, through acquisition and disposal, from a company with operations in plastics, waste management and a range of non-core investments to a much more simplified business with a sole focus on plastics.
By far the greatest step in this transition came in July 2015, when One51 announced the acquisition of a 67% majority stake in IPL, a Canadian plastics business with operations in the environmental, bulk-food and retail sectors, for €201m.
The IPL deal was significant for One51, effectively doubling the group’s turnover. IPL also brought with it a client list in the food sector that included companies such as Proctor & Gamble, Kellogg’s and Kraft. One51 built on this move into North America by acquiring Encore Industries in a €32m deal in November last year. Encore is a producer of rigid plastic packaging products for the North American market, with manufacturing facilities situated in Ohio, Georgia and Minnesota.
And in March this year, One51 exited from its ClearCircle waste management business by selling 100% of Clearcircle UK and 75% of ClearCircle Ireland for a total consideration of €50m. The company is retaining a minority shareholding in ClearCircle Ireland with the option to sell this in the future. One51’s most recent acquisition in the plastics sector was announced last week, with the company agreeing a $150m deal for Macro Plastics, the world’s largest manufacturer of rigid plastic bulk bins based in California.
Macro operates from three manufacturing facilities located in California, Washington and Kentucky. Walsh describes this latest deal as “transformational” for One51, as it gives the company a manufacturing footprint on the west coast of the US, which is viewed as a key area for growth.
Macro had revenues of $76m in 2016, with earnings (EBITDA) of $16m. For the 2017 financial year ending in December, One51 estimates the business will increase revenues to $95m and earnings to $19m, meaning the business has healthy earnings margins above 20%.
Attractive investment
The solid work being undertaken by Alan Walsh and his team at One51 to transform the business into a leader in the global plastics sector did not go unnoticed. In 2014, Dermot Desmond bought into One51 by acquiring a 6% shareholding in the company, after investing €7.5m. Desmond further increased his stake in the company by mopping up another 16% of shares in August and September 2015, for close to €45m.
Desmond continued to buy shares in the group, via his private equity firm IIU Limited and related parties, until his shareholding reached 26%. Larry Goodman has been an investor in One51 since 2006 but also began building his stake in the company in 2015 when his investment company, Vevan, increased its stake to just under 5%.
Around the same time as Goodman and Desmond were building their stakes in the company, the private equity firm Capvest made a preliminary takeover approach of €1.80 per share for One51, which valued the company at almost €300m. However, this approach was rejected by shareholders, as the price was seen as too low and Capvest bought no shares in the company.
First IPO attempt
In March 2016, One51 announced plans to list on the stock market, pending approval from shareholders. However, as part of these IPO plans, One51 was to gain full control of the Canadian plastics business IPL by issuing shares to the remaining Canadian investors in exchange for the 33% of shares they still controlled.
These shares, which were valued at €38m, would have given the Canadian investors a 20% stake in One51 but would have diluted the stake of existing shareholders, effectively giving them a smaller slice of a bigger pie.
The proposal was to be put to shareholders at an extraordinary general meeting in April last year, but was cancelled following consultation with “certain shareholders”.
The Irish Farmers Journal understands that the shareholders in question included Dermot Desmond, who is believed to have been utterly opposed to the deal, given his stake in One51 would have fallen from 26% to below 15% if it had gone ahead.
With Desmond blocking any deal that would see his shareholding diluted, One51’s plans to list on the stock market looked to be in limbo.
IPO back on the cards
But last week the company announced that the entire shareholding of IIU Limited (Desmond’s private equity firm) and related parties had been acquired by the Canadian investment firm Caisse de dépôt et placement du Québec (CDPQ) in a private trade.
CDPQ already controls 22% of the remaining shares in the IPL business, meaning it has a vested interest already in One51.
While no details of the deal between Desmond and CDPQ were released, the Irish Farmers Journal understands that Desmond unloaded his 26% stake for a premium price significantly higher than the share price of €1.80 to €1.85 paid when he was buying up significant blocks of One51 shares in 2015.
And while a sale price in the range of €2.50 per share has been rumoured, which would have netted Desmond close to €100m, there remains huge speculation among remaining shareholders as to the actual price agreed, as this is likely to set the floor on any share listings down the road.
But with Desmond now out of the picture, the stage would appear to be set for One51 to move ahead with its plans to float on the stock market. The company is almost back where it started just over 12 months ago, when it first proposed a stock market flotation with investors.
However, some key questions remain for the company, particularly around which bourse the company will actually float on.
Toronto has already been suggested as a possible location, which makes sense given that it is the backyard of CDPQ. The Canadian investment firm, which manages more than $270bn in assets, is now the largest shareholder in One51, meaning it is likely to have a big say on this matter.
Added to this, following the acquisition of Macro Plastics last week, the majority of One51’s business is based out of North America today. Looking at 2016 figures, almost 70% of revenues and 73% of profits for One51 will be generated in North America once the Macro business is included. Less than a third (31%) of One51’s business today comes from its plastics businesses in Ireland, the UK and China.
In terms of attracting future investors, locating close to your core sales markets will be important for the company. However, it could be likely we will see a dual listing for One51 on both the Toronto and Dublin exchanges.
At present, about 25% of shares in the company are controlled by a number of Irish co-ops including Glanbia, Kerry Group, Lakelands, Dairygold and North Cork. On top of this, an additional 5% of shares are understood to be owned by farmers and associate companies of the co-ops, while individuals such as Larry Goodman still maintain a healthy stake in the company.
To accommodate these investors and allow them to trade shares freely, a dual stock market listing in Dublin could be on the cards.
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