Brexit triggers sale of Reynolds stake in C&D Foods to Goodman
Pet food company founded 50 years ago by former Taoiseach Albert Reynolds
BUSINESSMAN Philip Reynolds, son of former Taoiseach Albert Reynolds, has sold down his last remaining 15pc stake in the family business, C&D Foods, to beef baron Larry Goodman.
Reynolds told the Sunday Independent that Brexit had been the trigger for his exit from the company. He also is leaving the company after almost three decades as CEO.
The company was founded by the late Albert Reynolds 50 years ago in Edgeworthstown, Co Longford.
Goodman’s ABP Food Group first invested in the company in 2008.
It took a 50pc stake, helping C&D to fulfil ambitions to become a consolidator in the market and expand in Europe. The pet food company now has annual revenues of €500m and spans nine countries, employing 1,500 people.
Reynolds said that in excess of 40pc of the business remained UK-focused.
Under the 2008 agreement with Goodman, there was a put-and-call option under which both parties would review the business and shareholding periodically.
“I had always an opportunity to put my shares to ABP and they would have to buy them, and similarly there was a time when they could call on my shares and I’d have to sell them,” said Reynolds.
Recently, the pair held a meeting regarding the shareholding.
“Larry and I had the conversation and our agreement, our understanding coming out of it, was that Brexit is a huge issue,” said Reynolds.
“It is a huge issue for every business that trades in the UK and we’re no different in that. We have to be Brexit-ready whatever that means and in whatever form Brexit takes.
“Did I think it was going to be now? Did I think it was going to be over this issue? No is the honest answer to that,” said Reynolds. “It was all about what’s right for the business and we both concluded from that the time — albeit not of our choosing — the time is right now.”
He agreed with Goodman that having a minority shareholder would not be beneficial in the current environment. Reynolds said he and Goodman had enjoyed an extremely positive working relationship and that ABP’s backing had helped the company expand and thrive.
“It’s very, very tight margin [the business], we’re dealing with the largest retail groups all across Europe, it’s fiercely competitive, and, at times, like the finance crunch, no money available to do anything — and I’m not even talking about expanding, I’m talking about to run day-today businesses — you need somebody of the strength of an ABP to get you through that.”
Pedigree, owned by Mars, and Nestle dominate the pet food sector with C&D Foods focusing on the private label business, which means it makes pet food branded for individual supermarket chains.
Reynolds said selling the stake was a very emotional decision given the family’s history with the business. However, he now plans to invest in new business ventures.
PHILIP Reynolds carries around a slim, modern black leather satchel, free from unnecessary clutter. But one concise document is always with him, tucked away inside a folder — a handwritten agreement from 2008 in which he agreed to sell half of C&D Foods, the family pet food business, to beef baron Larry Goodman.
In a world of long and complex legal agreements, it is notable for its brevity and simplicity.
“We talk about a one-page man. It’s not off the ground I licked it,” he says, a reference to his late father, the former Taoiseach Albert Reynolds, who famously sought to have issues distilled down to a single page.
On Friday, he finished working for the family business after selling his last 15pc stake in the company to Goodman’s company ABP. Reynolds says the sale has been an emotional one, albeit one that has been in the making for some time.
“I came to terms with the fact that C&D was not going to be ‘Reynolds’ back in 2008 when Larry and I did the deal. And in my mind, it was always a natural progression over time that at some point I would exit the business.”
The initial deal was borne out of a pivotal and potentially catastrophic moment in the business, which had originally been established by Albert Reynolds in 1969. In 2006, a fire destroyed the pet food factory in Edgeworthstown, Co Longford.
After the devastation, Philip Reynolds, who was running the company, began to see opportunity, particularly the potential offered by a move away from canned food to single-serve pouches. Prior to the fire, the company imported cans from the UK into Longford where the products were canned, processed, sterilised, packed, labelled and then shipped directly to the UK or Irish retailers.
“I had fairly grandiose plans as to what we might be able to do and how we could grow the business because up to that point the business was primarily an Irish and UK-based business,” says Reynolds. “I had seen how the pet food business had changed and I had at that time come to the realisation that a lot of consolidation that needed to happen in our business was happening. I felt that within all of that, there was going to be opportunity for C&D.”
He decided against rebuilding a canning factory in Edgeworthstown but to invest instead in pouching technology. A €30m investment in the new plant was covered by the insurance money. The other part of his strategy involved acqusitions.
“What we didn’t have at that stage then the funding to get involved in consolidation, growing the business and so on,” says Reynolds. “And the reason why ultimately I did a deal with ABP and Larry Goodman was because I sold him the ideas that I had about how we could consolidate the pet food industry, not just in Ireland and England, but across Europe.”
Larry Goodman and Albert Reynolds were both central figures in the Beef Tribunal but prior to the C&D investment, the families had no business dealings.
“The relationship was one more of a personal relationship rather than a business relationship,” says Reynolds. “That said, I also knew that ABP had expressed interest and had attempted previously to get into the pet food business. And it was a natural extension of what they do anyway, so I knew it wasn’t completely foreign to Larry in terms of what he might have been interested in.”
At the time C&D and ABP both shared a chairman, Ron Bolger, so getting a proposal across Goodman’s desk was never going to be an issue. Goodman didn’t hesitate, according to Reynolds.
“I met him at five o’clock on a Friday evening in his hangar in Venair (a Goodman company). And at eight o’clock that evening that’s when we had an agreement,” says Reynolds producing the handwritten document.
Growing up, business influenced Reynolds rather than politics as his father entered that sphere when he was well into his teens.
The second eldest of seven children, he boarded at private school in Roscrea, but worked in the factory during holiday time.
“Myself and my next-door neighbour, Declan Flynn, who still works in C&D to this day, he and I used to thumb a lift from Longford up to Edge- worthstown for our summer job in C&D. And at that stage it would be everything from offloading raw materials, hand loading containers for the UK, working on labelling lines, whatever it was, we would do it.”
Upon leaving school, he had settled on working in the business but his father was adamant that he get a third-level eduction. However, a new factory was being built and they both agreed that the young Reynolds should see that process firsthand then go on to college before returning to C&D.
“But I went in there in ‘82 and events took over for him because then he ended up being a minister in 1982 and then his career took him completely away from C&D and I was in there. The fact that he was so far removed from it, having run it himself from 1969, I think he felt it was nice to have a member of the family there, even though the member of the family was 18 years of age or whatever I was.”
In the end, Reynolds never left the business and ended up completing his third level qualification at weekends through IMI.
In 1990 and at the age of 26, Reynolds had just got married but when returning from his honeymoon was surprised to be greeted at the airport by the company sales manager Liam Feeley. The big news at the company was that the CEO had resigned and that Reynolds was being considered as his successor.
“I said: ‘Liam, hold on a minute here, now, I’m 26 years of age, I’ve just got married, I’ve planned out my next year, I’m going to be at every race meeting in the country and I have no interest in taking over,’ and he said: ‘well, that’s why I’m here,’ he said, ‘you have to’.”
“I met with dad and he had guys (in the company) onboard with him at that stage advising as to what he should do. However it transpired, they decided that they were going to give me a run at it.” Reynolds is hugely grateful for the support his senior colleagues gave him when he took the reins at such a young age.
Judging by the figures, he was the right choice for the job. When he took over the business in 1990 turnover was €15m and has now hit €500m. The business has acted as a consolidator, as Reynolds envisaged, with operations in The Netherlands, Austria, Denmark, Spain, the UK, Italy and Germany.
According to Reynolds, the agreement with Goodman meant that his stake would be sold down as ABP invested in the expansion of the company, assuming that the opportunities outlined by Reynolds materialised.
“His view was that if the business did grow to the extent that he would like to consolidate it with the ABP business and to do that he needed 51pc and I said look, you’re not getting it today but I totally understand and if my plans are realised for how the business can develop and grow, I’ve actually no issue with that, and that’s what happened.”
His stake was diluted to 35pc in 2012 at the time of a major acquisition.
“We did a couple of very, very large acquisitions and to help finance those large acquisitions I diluted my shareholding,” he says. “And that’s where we ultimately ended up now, where I ended up with 15pc.”
Under the agreement, there was a put-and-call option, which meant both parties would review the businesses periodically. “I had always an opportunity to put my shares to ABP and they would have to buy them, and similarly there was a time when they could call on my shares and I’d have to sell them,” said Reynolds.
The threat of Brexit triggered a decision by ABP to buy the remaining shares.
“Did I think it was going to be now? Did I think it was going to be over this issue? No is the honest answer to that,” said Reynolds.
“Larry and I had the conversation and our agreement, our understanding coming out of it was that Brexit is a huge issue. It’s a huge issue for every business that trades in the UK and we’re no different in that. We have to be Brexit-ready whatever that means and in whatever form Brexit takes. And he and I agreed that to address that properly, it would be only right and fair at this stage that he would have a blank piece of paper to make the decisions that are right for the business. And not to have a minority shareholder.”
Reynolds also felt it was the right time to leave his role as CEO of the company.
“Larry and I have had a very, very good working relationship, I’ve nothing but the height of praise for him as a partner and as a colleague,” says Reynolds. “Even though Larry would have been very, very happy if I had agreed to stay on and continued to run the business — it’s not that I don’t want to, it’s that I can’t. To me it’s time, it’s the right time for me to move on. C&D is now ABP. I want it to be seen to be ABP. To me it was even when I only had 15pc of it, I still felt like it was 100pc mine and I can’t bring my own head around to be able to see it any differently.”
Reynolds will spend some time indulging one of his passions, horses, and will make his annual pilgrimage to Cheltenham next month, assuming it goes ahead. But his face lights up when asked about the next step in his business life.
“I’ve been very fortunate to have the career I’ve had, the life I’ve had but it has been 37 years as Dermot Desmond once told me with my head stuck in a pet food can so maybe it’s time to take it out of a pet food can now and look elsewhere,” he says. “I have other things that I want to do. And they’re not in the pet food space and before you ask me, they’re not in the horse world either.”
“I’m young enough still to have another crack at something and if I make a mess of it, well sure it won’t be the end of the world.”