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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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18 Comments
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    Mute Fozz
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    May 7th 2013, 1:55 PM

    Will we still have to pay if we logon to BitBuzz using our FB/Twitter credentials?

    For years now I’ve been places where I saw Bitbuzz and instantly discarded it as a viable wifi option as they charge you (€12.50 a day.. outrageous!) to use the service. I will use it now if all i gotta do is input my user credentials.

    Can never understand why all bars/cafes don’t have free open wifi. In Vietnam nearly every place you walk into has this and it’s just so handy (and this being a 3rd world country). Just limit the speed so any saddo wanting to download 100gb of data wont get a use out of it while the 99% who simply wanna check mail, use maps, read a review or whatever can use it.
    Here in Ireland it’s a case of there being no wifi, or wifi where the access code is 32 random characters that no staff seem to know….it’s a joke.

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    Mute Begrudgy
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    May 7th 2013, 2:03 PM

    This is mainly because i think that every business that offers free wifi must by law know who is using it. Login through Facebook or Twitter is a way of doing this.

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    Mute tom
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    May 7th 2013, 6:59 PM

    We need to move on… wifi should free and Country wide..

    Any idiot in power looking out for the interest of big business should seek a job there rather than misrepresenting the people who voted them in

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    Mute Brian Daly
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    May 7th 2013, 1:39 PM

    Nothing new here though? They are just allowing people use their Facebook or Twitter credentials to create an account just like many web sites including this one.

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    Mute Orly
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    May 7th 2013, 2:46 PM

    I wouldn’t trust just anyone with my Facebook details though. I don’t even trust Facebook with them.

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    Mute Brian Daly
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    May 7th 2013, 4:06 PM

    They never get your Facebook credentials – these remain with Facebook. AT basic level, all they can access is your user public profile and friend list. These are publicly available to anybody. Anything else you voluntarily give up through permissions.

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    Mute Tal Tallon
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    May 7th 2013, 2:23 PM

    But I have all you can eat data…

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    Mute Jack Bauer
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    May 7th 2013, 5:36 PM

    Good for you but a lot of people are ready to go so this would be handy for them

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    Mute pg
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    May 7th 2013, 2:46 PM

    I’ve so much down load allowance I don’t need free wifi

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    Mute Jason Bourne
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    May 7th 2013, 3:08 PM

    Same here. All-you-can-eat-just-dont-take-the-piss tarriff.

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    Mute All Aboard To China
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    May 7th 2013, 5:44 PM

    Where is bitbuzz free?? Always been asked to pay, no thanks

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    Mute Liam Donohoe
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    May 7th 2013, 9:09 PM

    @ All Aboard to China

    It’s free for 20- mins in all Insomnias for example and other participating outlets.

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    Mute JohnMoz Molloy
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    May 7th 2013, 6:58 PM

    BitBuzz off.

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