2002: More than a paper tiger
Wednesday, November 30, 2011
By Brian Hewitt
t is late on a warm July afternoon, and a scattering of sailboats are bobbing like shore birds on the shimmering surface of Lake Michigan. It’s impossible not to inhale this floor-to-ceiling-glass view from the southeast corner office of the towering Smurfit-Stone Building’s 17th floor. Directly below, city traffic bumps and grinds its way through the busy downtown intersection of Randolph Street and Michigan Avenue.
It’s a long way to Tipperary.
Ireland’s Michael Smurfit, arguably the most powerful man in European golf, is just off a plane from the other side of the Atlantic. His body clock is in mild revolt. And his white dress shirt is a little wrinkled. But he is not too tired to talk about the game and the business of golf. He has agreed to sit, on this Wednesday, for a rare one-on-one interview. His personal assistant is instructed to hold all calls.
The American financial markets still are under siege and the subject quickly turns to the goose and all those golden eggs the golf world scrambled, poached and fried during the all-you-can-eat money buffet that was the 1990s.
Tournament purses will shrink in the short term, Smurfit says matter-of-factly. Sponsors will become harder to find. “When the dancing finishes,” he says, “the music stops.”
“That may be anathema to the PGA Tour in America and the European Tour,” he continues. “But I suspect that’s just the reality of life.”
The message is clear: If the people who keep the books and chart the profit margins for big-time professional golf aren’t shivering, they should be. There are going to be less beans to count.
Cold realities are nothing new to Smurfit. He is 66 years old, with, as he puts it, “protruding discs all over the place.” He can’t play golf, the game he loves. The pain has grown too great. It is a development, Smurfit says, that is “disastrous.” . . . “Breaks my heart,” he adds.
“Eats him up,” says Paul Crowe, Smurfit’s director of golf at The K Club, the Irish venue near Dublin that will play host to the 2006 Ryder Cup. It has been six years since Smurfit’s last 18-hole round. He shot 6 over par that day at Royal Mougins in Cannes, France. That evening he felt terrific. The next morning he could barely move.
Smurfit is fit now but can’t afford the permanent damage more golf might bring. Nor can Smurfit afford to live in the country in which he was born, played “schoolboy” golf and received several honorary doctorates for his contributions to education. (In Ireland, he is commonly addressed and referred to as “Dr. Smurfit.”)
No, the packaging fortune Smurfit amassed is so large – his net worth has been estimated by financial experts at close to $400 million – that tax considerations drove him to declare “residence” in Monaco. The Irish government allows him inside his native land 90 nights and 180 days per year. That, too, is difficult.
And now the leveraged buyout boys are on the scene. Madison Dearborn Partners, a Chicago-based private equity firm, has offered 3.7 billion euros (approximately $3.61 billion) for Smurfit’s company, the Jefferson Smurfit Group. If 80 percent of Smurfit’s minority stockholders assent, the deal will go down before summer’s end. It will be the largest leveraged buyout of a European company in history. Approval is expected.
To put that 3.7 billion figure in perspective, Burger King, the world’s second-largest hamburger chain, recently sold for 2.259 billion euros.
Jefferson Smurfit is the name of Michael Smurfit’s father. The elder Smurfit pulled his son out of school north of Dublin and put him to work in the family business when he was 16.
Ten years later, Michael Smurfit owned his own company.
Two years after that, he says quietly, “I was richer than my own father.”
Eventually the Jefferson Smurfit Group, run by Michael Smurfit, would become the world’s largest producer of container board, the paper product used to make cardboard boxes. That achievement, Smurfit says, means even more to him than bringing the Ryder Cup to Ireland. “Nothing,” he says, “compares to that.”
Michael Smurfit was well into his 30s before he found the time for his first vacation. Only much later would he develop a taste for the finer things in life. Things like vintages and travel and design.
Arnold Palmer, as vintage as it gets in golf, and Ed Seay designed the nonlinks K Club course for Smurfit in Dublin’s sniffy “horse country” at no small cost. Their company is putting the finishing touches on a second course on the grounds that will open next summer. The 45-bedroom manor at The K Club houses a large collection of the paintings of Jack Yeats, William’s brother. The wallpaper is English hand-made. The rugs are French weave. The chandeliers are Waterford. The fireplaces are Georgian. Not surprisingly, The K Club is Ireland’s only Grade AA 5 Red Star hotel.
And the eyes of certain of his countrymen are green. The more successful Smurfit became over the years, the more he took on the public trappings – corporate jets, society galas, entourages – of success. And not all the Irish liked it. An economic alley cat of a country, Ireland joined the European Union in 1973, and by the ’90s had transformed itself into a self-proclaimed, roaring “Celtic Tiger.”
Certain people resented how Smurfit, in the middle of all the tiger’s growth, wielded the gun and the whip. Others understood. Critics said he benefited from low wages being paid to Irish workers compared with workers in other EU countries. Others defended him.
“If you’re going to play with the big boys in this world, you can’t fly coach,” said one Irishman in the golf industry.
Added another, in decidedly plainer language: “You can’t do business with your backside hanging out of your trousers.” Still, Smurfit was criticized for his large salary and his spending. The Street took a dim view of his 1998 purchase of 29 percent of Stone Container Corp. It depressed Jefferson Smurfit’s share price. Smurfit weathered it. He pressed forward. He expanded his horizons.
“I was probably a late bloomer at learning how to enjoy my life,” Smurfit says. “I gave up golf twice in my life – once for 10 years and once for 12 years – because I just couldn’t take the time. I was just too busy. But there comes a time in your life when you’ve achieved most of the things you want to achieve and you ask what else would you like to do.
“I wanted to learn about other things – decorating homes, wines, things like that. I used to eat to live rather than live to eat. I never had a chance for the finer things in life when I was younger.”
In that context, it’s easier to understand Smurfit’s decision to allow Madison Dearborn to proceed as an acquisition
suitor. According to Madison Dearborn sources, Smurfit will stay on after the buyout as chairman of the Jefferson Smurfit Group for six years; get a 7.4 percent interest in the company and receive an annual salary of 2.75 million euros. Smurfit stands to make 240 million euros .Thomson Financial’s buyouts newsletter quoted one analyst as saying Smurfit “wants to go private and cash in his chips before he gets out of there. That’s why this is all being rushed through.” Not surprisingly, there is concern in European golf circles that the deal will somehow lessen Smurfit’s presence on the professional golf scene. Next month, the eyes of the golf world will turn to The Belfry in England for the 2002 Ryder Cup matches. When the event returns to Europe in 2006, the scrutiny on Smurfit, his course and his involvement will increase exponentially.
Smurfit has sponsored the European Open at The K Club for the last eight years. Before that, he was very active in all kinds of ways. (“He flat-out propped up our tour when it was struggling in the ’80s,” says one European pro.)
For his part, Smurfit is quick to correct anyone who thinks he’s about to abdicate.
“The Smurfit European Open will continue for quite a number of years into the future,” he says. “That was part and parcel of the Ryder Cup agreement.”
Crowe says Smurfit also is formulating a wide-ranging initiative to further develop junior golf in Ireland. It is not dissimilar to the First Tee program in the United States, and it is badly needed. Smurfit confirms something is up. But, he says, “I can’t tell you the plans just now.”
The 2006 Ryder Cup at The K Club will be the first held on Irish soil, which has made Smurfit a hero in Irish golf circles. Europe’s best players are especially appreciative of the changes he approved to Palmer and Seay’s original design. The role he took in implementing those changes – which made the course longer, harder and infinitely more interesting – did not go unnoticed.
“He’s very hands-on,” Crowe says of Smurfit. Crowe, by the way, wears a suit and tie to The K Club every day. “We’re not stuffy and there’s not a lot of old money here,” he says. “But this is a business.” And there (start ital.) is (end ital.) plenty of “new” money at The K Club.
All you have to do is estimate the average blue book of the cars in the members’ parking lot. The same reporter who got the one-on-one with Smurfit in Chicago did just that six days after sitting with Smurfit in the States. He also poked around The K Club unescorted. Then he toured the course with Crowe. It had been four years since the reporter’s last visit to The K Club. The improvements were dramatic.
Turns out Smurfit had beaten the reporter back to The K Club and spent even more time with Crowe walking the course over the weekend.
“He’s a perfectionist,” says Paul McGinley of Smurfit. McGinley is an Irishman and a member of this year’s European Ryder Cup team. “I mean The K Club was a mess two years ago, and everybody was writing it off. Now it’s as good a conditioned course as you will find anywhere. That characterizes the man. He finally got it right.”
Among other things, Smurfit fired Tom Brooks, The K Club’s American superintendent, and hired an Irishman, Gerry Byrne. Byrne, Smurfit says, has a better feel for Irish grasses. “He, in fact, turned the greens from mediocre into very good. They’re not at 10 yet on a scale of 1 to 10, but they’re at 9.”
Crowe says The K Club’s greens are mowed to “Stimp” out at 8 for the members and 10.7 for the European Open. The target for the Ryder Cup: a greasy 11.5.
The attention to detail at The K Club is relentless. And the Euro golf brass regularly bow in obeisance. “The Smurfit European Opens have been unqualified successes,” says Ken Schofield, the European Tour’s executive director.
So why does the occasional Smurfit bashing persist?
Part of the reason is not enough people understand Smurfit’s roots in the game. Too many see him as a business man seizing an opportunity to “brand” his company and his ego.
“As always, there have been plenty of critics ready to line up and accuse Dr. Smurfit of having some personal agenda – a vanity project,” says Helen O’Brien, Smurfit’s corporate events chief.
There also is this: Smurfit is not an Irish cliché. He is not a glad-handing, back-slapping, ale-swilling, florid-faced hail-fellow-well-met with a built-in laugh track and a permanent twinkle in his eye. His accent is barely discernible. His inflections are subtle. He is not a leprechaun. Nor is he any kind of poster boy for what Americans have come to expect from their Irish icons.
Moreover, says one Smurfit acquaintance, “he doesn’t suffer fools.”
This is a man who commands rooms without demanding them. “He’s a good listener,” Crowe says. “But you don’t achieve what he has without being firm when you have to be.”
It will be interesting to see how much respect Smurfit commands when talks begin on the selection of a captain for the 2006 European squad. Names like Bernhard Langer, Nick Faldo, Ian Woosnam, Colin Montgomerie and even Sandy Lyle have been bandied about. All are accomplished players and legitimate candidates. None are Irish.
Smurfit believes strongly that the 2006 captain should be an Irishman. “I would hope,” he says with gravitas, “that people will listen to my views.”
Sources say Smurfit’s first choice is the popular Des Smyth. Smyth was a missed 3-foot putt on the 54th hole away from playing with eventual winner Ernie Els in the final group of the last round in last month’s British Open at Muirfield.
Security will be tight at the 2006 Ryder Cup. Smurfit promises that. He was in attendance at Brookline for the matches in 1999 and was disgusted with the lack of crowd control. On the other hand, he smiles when he considers what his countrymen will do to get inside the gates at The K Club in 2006.
The prospect energizes him. He leans forward, the inflection suddenly less subtle. “The Irish are devils, you know,” he says, pronouncing the word “devils” more like “divvels”. “They’re gonna be swimming down the River Liffey and floatin’ in on hang gliders and diggin’ trenches to get there. The demand for tickets will be three or four times the ability to meet it. Yet it’s one thing that every father wants to bring his son to if he can get a ticket. The Irish are golf mad. And the Ryder Cup’s not gonna be back to Ireland for many, many decades to come.”
By then Michael Smurfit will be gone from the scene but not forgotten. By then the chroniclers of the game will have decided whether his contributions were simply a vanity project or whether they constituted a legacy.
Don’t bet against the doctor. He’s been on good paper for a long time.