Opinion: When he set up the Irish Agricultural Wholesale Society (IAWS) in 1897 it is unlikely that Horace Curzon Plunkett envisioned that 108 years later it would be charging the people of Ireland €1.80 to drive across the Liffey on a bridge.
Taking a 21 per cent stake in National Toll Roads (owner of the Westlink) at a cost of €110 million may be within the letter of the society's rules, but it does not quite fit with the spirit of an organisation set up to "develop and improve the Industry of Agriculture in Ireland, to promote the principles of co-operation and to assist Co-operative societies in Ireland in any way that might be expedient".
The investment in NTR is the clearest sign yet that the 52 co-operatives which are members of the Irish Agricultural Wholesale Society believe there is still some life left in the old war horse.
Looking at the 2003 accounts for the Irish Agricultural Wholesale Society, the reasons for this decision are not straightforward. These accounts are the most recent ones available from the Register of Friendly Societies and predate both the NTR purchase and the mooted deal with SWS, the Cork-based business services group.
They show the society's assets at that stage were its stake in food group IAWS plc - which was spun off in 1988 - and a number of property investments. It also owned three businesses, Irish Pride Ltd, the second largest baker in Ireland, and two companies involved in recovering proteins, Premier Proteins and Monery By-Products.
These businesses would not appear to have been profitable at the operating level. They had a turnover of €76 million offset by costs and operating expenses totalling €82.3 million. However, the society reported a bottom line profit of €24.9 million due to the inclusion of a €19.7 million contribution from its stake in IAWS plc and an exceptional gain of €18.3 million from the sale of IAWS plc shares that year.
Based on these accounts, the most sensible course of action for the society would have been to continue with the strategy of passing on IAWS plc shares to the members which commenced in 1996 and had seen more than €300 million worth of shares and cash realised for members. When that was complete the next step would have been to wind up the rump of the society and distribute the cash to the members. The pay day would have been substantial given the society's balance sheet at that stage showed assets of €122 million.
One suspects that this is exactly what some of the larger member co-operatives wanted to do back in 2003, as they could have usefully found a home for the money in their own businesses. But the argument was not quite so straightforward for the smaller co-operatives that make up the bulk of the 52 members of the society.
The strategy now being promulgated by the society under Philip Lynch - the former IAWS plc chief executive - is attractive to them for a number of reasons, not least because it gives them an opportunity to invest in areas such as infrastructure, waste management and energy. Many of the smaller co-operatives simply would not have the wherewithal to invest directly in these business to any significant extent. Equally they would struggle to get a decent return on the capital that would accrue to them should the society be wound up.
Coupled with that, they have done very well out of Mr Lynch and IAWS plc, which, according to Goodbody Stockbrokers, was one of the best performing food stocks globally over the last decade. He remains non-executive chairman of the business, which is run by his protege Owen Killian.
As a result, the members appear to have decided to keep faith with Mr Lynch and last year recapitalised the society by allowing it to sell eight million shares in IAWS plc and retain the proceeds. This, in turn, led to the NTR transaction and presumably, in time, the SWS deal. More deals will follow no doubt.
What they might be is far from clear and Mr Lynch is keeping his cards close to his chest. The society retains an 11 per cent stake in IAWS plc and, given the plc's continued strength, Mr Lynch may struggle to find a better investment.
But if his game plan is to create further wealth for the society's members by investing in infrastructure, then ultimately the co-operative structure is not the ideal one.
Eventually he will run up against the same obstacles encountered by the big co-operatives in the 1980s which primarily related to access to capital. The solution now will probably be the same as the solution then: spin the operating business off as a separate company, probably with a stock market listing. The society has already hinted at this as much and it would go some way to explaining why Mr Lynch, who has already built one successful business and been well rewarded for it, still has the appetite to do it all again.
The birth of a IAWS plc Mark II, this time focused on infrastructure, waste disposal and alternative energy, looks like a pretty good bet in the near future. What would Horace Plunkett have made of it all?
