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Sam Boal/Photocall Ireland

Why a Dublin firm’s mega-merger has plunged the Irish stock exchange into an existential crisis

Euronext Dublin’s niche could be building a home for up and coming businesses looking to scale quickly and which want a jumping off point into the wider European market, writes Paul O’Donoghue.

SMURFIT KAPPA HAS been one of corporate Ireland’s biggest success stories. Starting as a small box-maker in Rathmines in the 1930s, it has grown to become one of the biggest packaging companies in the world.

Earlier this week, it announced a mega-merger with WestRock, one of its US rivals. It means the label of ‘one of the biggest’ packaging companies in the world will no longer apply. It will become *the* biggest company in the world in its field. No qualifiers.

While there are some concerns from investors that it’s overpaying, when you take a step back, the company’s growth has been nothing short of extraordinary. 

One might think its ascension to the very top of its field would be met with cheers in the world of corporate Ireland.

Instead, the deal is likely to result in plenty of soul searching – particularly among those in charge of the Irish stock exchange.

While its headquarters will stay in Dublin, the newly merged entity, Smurfit WestRock, will shift its primary listing to New York.

It means Smurfit will end its association with the Irish exchange, which had stretched back to 1964.

It marks the latest body blow in what has been a harrowing year for the exchange, renamed Euronext Dublin after being acquired in 2018.

CRH and Flutter

In April building materials giant CRH announced it would quit the Dublin market, also moving its primary listing to New York. The measure is set to complete later this month and will mark the exit of the exchange’s single largest company.

Widely tipped to follow it out the door is Flutter, the gambling giant behind Paddy Power. The firm got investor backing in April to seek a listing in the US, with executives giving no guarantees of maintaining even a secondary listing in Dublin.

Between them, these three firms account for about half the trading on the Irish exchange.

The main reason for the departures of each is scale. By listing in the US, they hope to expose themselves to a much bigger pool of investors, boosting interest in the business and giving themselves more opportunities to grow.

Losing all three in short order was always going to be a bitter pill for Euronext Dublin to swallow. But it would be mitigated if there was a steady pipeline of new companies coming through.

Unfortunately, that’s not the case. In the last four years, just three companies have pursued a new listing in Dublin. 

Just one, Unipar, had an initial public offering (IPO) worth more than €100 million, and that was more than four years ago.

This matters for a few reasons. There’s a clear direct cost for the state. Stamp duty is paid when people buy and sell shares. Less trading means this income stream drops – the numbers vary, but some estimates have foregone tax revenue from lower trading potentially reaching €300 million.

But the bigger problem is an existential one. Think of all the employment which a company like Smurfit Kappa has created. It’s important for indigenous companies to have a way to grow and scale – the exchange has provided that.

It can also give Irish investors a greater stake in the domestic economy, whether that’s in hotels with Dalata, house building with Glenveagh or Cairn, and so on.

It hardly needs repeating, but Ireland is still hugely reliant on multinationals. While some may be happy enough with that while the corporate taxes continue to roll in, building up home-grown businesses should still be a priority.

If one day, for whatever reason, some of the multinationals did leave, Ireland would be exposed, with a hole blown in the state’s tax take.

In terms of what can be done to address this, Euronext Dublin has made some suggestions. These include tax incentives for entrepreneurs who sell their own shares in companies as part of an IPO, or a tax credit scheme to make the IPO process cheaper for new businesses.

The focus is at least where it should be. For the likes of CRH or Smurfit, the promise of major increases in valuations and investor pools is not one which can be easily matched here.

Euronext Dublin’s niche could be building a home for up and coming businesses looking to scale quickly and which want a jumping off point into the wider European market.

This appears to be what Euronext had in mind when it first acquired the exchange, referencing how it could take advantage of Ireland’s EU location post-Brexit.

Euronext itself should also look again at its own approach to encouraging listings. Its ‘IPO Ready’ scheme, a six-month programme detailing the listing process for businesses, has run since 2015. 

In that time, over 40 companies have completed it. However, just one – HealthBeacon – has since progressed to an actual IPO. A review looking into the poor conversion rate would do no harm.

While the government has been slow to act in any significant aid or reform to the exchange, it should take the latest string of departures seriously.

Smurfit Kappa, nor any other company, has an obligation to hang around to keep the Irish exchange healthy for up and comers. 

But other Irish startups should be able to aspire to go on a similar journey to the one which brought Smurfit from a humble box-maker in Rathmines to a multi-billion euro business which will soon have 100,000 employees

It’s crucial the government and Euronext figure out a way to ensure that path stays open. 

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17 Comments
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    Mute buster
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    Apr 16th 2018, 9:47 PM

    It would depend, every second day then no. Every now and again then yes and I’d be hoping they would do the same for me

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    Mute Dotty Dunleary
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    Apr 16th 2018, 10:02 PM

    @buster: Hopefully you and your work mate don’t drive the Bus or Taxi in the morning, or operate machinery for a living!

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    Mute buster
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    Apr 16th 2018, 10:16 PM

    @Dotty Dunleary: yeah I drive his bus and mine at the same time

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    Mute Cindy Crawford
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    Apr 16th 2018, 10:38 PM

    @buster: Lol

    47
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    Mute Dotty Dunleary
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    Apr 16th 2018, 10:56 PM

    @buster: I’d say you park in his garage too!

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    Mute Tony Maguire
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    Apr 16th 2018, 9:54 PM

    Its funny that the HSE did a study on this, I work in the HSE, there’re heavy drinkers who go to the pub during working hours on a regular basis, including management! They could have just studied their own staff!!

    405
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    Mute Ben Gunn
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    Apr 16th 2018, 10:00 PM

    @Tony Maguire: How do you know they didn’t?

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    Mute Deborah Behan
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    Apr 16th 2018, 10:20 PM

    @Tony Maguire: we’ve never had alcohol at lunch! That’s mad Ted.

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    Mute Siobhán Ni Mhurchú
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    Apr 16th 2018, 9:57 PM

    Every now and again wouldn’t be an issue but on a regular basis? No

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    Mute Alan McDonald
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    Apr 16th 2018, 10:34 PM

    I worked in Dublin for 8 years until 2006 and now 12 years in London.
    It was never even a thought to drink at lunch in Dublin.
    Much more common in London.
    To answer the survey….rare is ok. Anything more is a problem.
    And never at lunch!

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    Mute Michael Lang
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    Apr 16th 2018, 9:50 PM

    In practice, most colleagues will not report an employee for drinking unless in a critical safety type role.

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    Mute Deborah Behan
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    Apr 16th 2018, 10:21 PM

    @Michael Lang: I have to say it’s a very rare thing and it’s usually around Christmas too!

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    Mute Ciaran Whyte
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    Apr 16th 2018, 9:44 PM

    If only there was a button to push, so we could vote on the poll…

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    Mute Toomasu Sumitsu
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    Apr 16th 2018, 9:44 PM

    @Ciaran Whyte: shhh… we have to cover for Garreth

    167
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    Mute Ann Experiment
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    Apr 16th 2018, 9:48 PM

    @Toomasu Sumitsu:

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    Mute James O'Donovan
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    Apr 16th 2018, 10:46 PM

    @Toomasu Sumitsu: Do you think now that we covered for him he will return the favour and open up the comments on the rugby stories for us?

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    Mute Dotty Dunleary
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    Apr 16th 2018, 10:00 PM

    No way would I cover for someone, just tell them you can smell alcohol from them and that they should go home immediately saying that they are ill before management get the smell of booze and they get fired…

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    Mute prop joe
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    Apr 16th 2018, 10:45 PM

    @the druid: let me guess your a bus driver?

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    Mute Dj
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    Apr 16th 2018, 9:54 PM

    No, absolutely not. You wouldn’t be doing your co-worker, yourself or your employer any favours whatsoever.

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    Mute Rochelle
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    Apr 16th 2018, 11:05 PM

    No, it’s never ok for a co-workers leisure choices to become my work problem.

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    Mute Philip
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    Apr 16th 2018, 10:07 PM

    How is this even a poll? Not sure if I’m more amazed by that or the question itself. Bottom feeders!

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    Mute Gavin Murphy
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    Apr 17th 2018, 10:13 PM

    @Philip: Not even a close friend or a one-off incident?

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    Mute Matt Connolly
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    Apr 16th 2018, 10:15 PM

    Only if it’s a rare occasion

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    Mute Sarah Connor
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    Apr 16th 2018, 9:53 PM

    Happens, as long as people are honest, and there’s nothing big that week, then all good, if it’s a big week and you’e relying on staff , for a job that requires it, then you should be sacked!

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    Mute prop joe
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    Apr 16th 2018, 10:43 PM

    No. Being a drunk is no way to carry on. I can understand people just out of college. But anyone who is muture knows, not to be drinking the day before work.

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    Mute Michael Heery
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    Apr 17th 2018, 4:10 AM

    @prop joe: would you buy drink or someone who is dependent on alkol and have it delivered. to their house if they were house bound. irish are always pushing drink as if its great fun…they call it craic in ireland..

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    Mute prop joe
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    Apr 17th 2018, 9:53 AM

    @Michael Heery: what? If I knew an alcoholic who was house bound I would not drop booze off to them. Drinking is great craic till you in the A&E after Arthur’s day.

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    Mute FlopFlipU
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    Apr 17th 2018, 5:54 AM

    It would be a difficult thing to do especially if he or she was a friend ,be it right or wrong ,my opinion only

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    Mute danny
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    Apr 17th 2018, 3:15 AM

    No. You are pathetic and immature if you ever let alcohol get in the way of work or family life. Grow up.

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    Mute John Quill
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    Apr 17th 2018, 4:20 PM

    Things have really changed in the last 20 years. Once upon a time you were nearly expected to come into work on a Friday dying and stinking of beer, doing a little as possible until the 15:30 cure. The most your boss would do was tut tut and throw his/her eyes to heaven, or give you a slagging. Nowadays its completely out.

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    Mute Marcella O Toole
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    Apr 16th 2018, 10:35 PM

    Only if the person admitted they had a problem and was willing to do something about it. So, temporarily, yes.

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