The Receivership of Waterford Wedgwood marks the end of a long relationship between Sir Anthony O’Reilly and Waterfrord Crystal, a product he dearly loves.
A very successful business man in Ireland and America, he bought into Waterford Wedgwood back in 1990 through his investment vehicle, Fitzwilton, along with Morgan Stanley, the American investment bank.
Sir Anthony had worked hard to secure a deal at the end of the year, where he would maintain a minority interest in the company with new investors, but this failed after a bank payment was not met on January 2nd.
It had been the third time that this bond payment had not been paid on the due date via Bank of America and thus the end of the road had been reached for the current owners as the banks sought administrators to the group to try and recover debts of over 400 million euro.
Sir Anthony O’Reilly and his wife Chrys Goulandris duly resigned as directors a few days later with her brother Peter Goulandris. They had invested a massive 400 million euro in the group to underwrite losses and pay out redundancy sums for factory closures in Waterford, Britain and Germany.
Late last Friday, the Rosenthal company was formally put into administration in this very complex international process.
Massive debt
The seeds of the massive big debt that hung over the Group for the last two decades go back to 1986 when then Chairman Paddy Hayes bought the famous UK ceramics firm Wedgwood. This was for a massive sum of 250m Irish pounds, flushed with profits from Waterford Crystal and a strong US dollar.
At that stage 3,200 employees were working in Waterford and Dungarvan, a massive Redundancy programme saw debts rise further when 1000 signed up for early retirement despite trade union opposition at the time. This cost the firm up to 70m at the time.
By 1990 as the world economy and the US in particular slowed at the end of the booming eighties for crystal, Dr. O’Reilly bought in with Morgan Stanley at what was a low share price compared to a few years previously. They bought in early that year and changes in work practices were sought, a long strike ensued followed by short time and more redundancies, as newly appointed chief executive Dr Paddy Galvin sought more efficient methods of making crystal.
Automation was brought in and out sourcing began, again despite opposition, by the year 1994, the company had been turned out and another wave of profits came. This was probably the best period for the firm under Dr. O’Reilly with the peak being achieved in 2000 when the Millennium crystal sales achieved record numbers, spearheaded by Redmond O’Donoghue, marketing supreme and later chief executive in that period.
Looking to Europe
In the mid nineties the Waterford Wedgwood Group began to look at Europe and Rosenthal, the premier German manufacturer of ceramics, at the time, Germany was suffering due to higher taxes to fund unification, later they bought into a ceramics competitor Hutschen-Reuter. Over 100 million euro was paid and with factory closure costs this investment never really paid off.
Stuart Crystal in England was also bought, this firm had limited market impact in terms of sales growth, but had potential, whether tastes had changed in the UK for more casual living and lifestyle, this luxury product had some successes.
One very smart acquisition was kitchen ware firm All Clad in America. That always made a profit and was sold for a surplus also. Royal Doulton in England, a lossmaker ceramics firm was bought around this time, as pottery making was rationalised in England. In hindsight it must be wondered if some of these acquisitions pushed the group into too much debt.
Following the work carried out by Dr Paddy Galvin in the mid nineties, it could be argued if fewer acquisitions were made and debts not built up, could the firm have survived under Sir Anthony O’Reilly. The factory closures in places like Wedgwood, Germany and Waterford/Dungarvan cost large amounts of capital adding to the big debt.
Questions for historians
If Wedgwood had been sold in the late nineties, would Waterford have survived in better shape than it is now. In the future, academics and historians will ponder over these questions. Back in 1990, Dr O’Reilly did put in much needed capital and expertise into the group and maybe did not get the appreciation he deserved.
At that time in 1990, 100m Irish pounds was invested. He did receive dividends subsequently from the mid nineties onwards but never got a full return on his investment. Morgan Stanley had sold on their shares as investment banks do.
While the McGrath family had a more paternalistic approach in the sixties and seventies, before UK investors Globe Investments came in ahead of O’Reilly, the harsher business world saw regular rationalisation from the nineties onwards.
Outsourcing became a major means of production as industrialists moved to low cost countries and unfortunately for Waterford the crystal with its high wage costs followed this economic trend.
Enter KPS
With American investors KPS coming in now, there is not too much manufacturing left to cut, it is more a great brand that needs to be re-developed when the upturn arrives eventually. The Visitor Centre will be a key tourism element also, this was a key investment when it took place back in the late eighties.
All Waterford will be hoping that there are better times ahead and that the product of crystal can be re-vitalised. Dr O’Reilly saw the great marketing potential after his Kerrygold success but now the baton passes on as it did with
The McGraths who took over from the Czech Baciks.
The commitment to Waterford Crystal was given by all three, the McGraths did best from their investment with Sir Anthony losing colossal sums of money.
The next set of investors are likely to be more careful in these recessionary times. Employment at the factories has slumped and in the future there may be a hope of some revival in design and development of the brands.
