Date: 10.28.2002
The legend of Sir Anthony O'Reilly was built on his leadership of H.J. Heinz. How has he done with his own money?
These days Anthony J.F. O'Reilly's point of self-reference seems to be a fawning authorized biography called The Player. He thumbs through the book for a reporter who is visiting his 28-room mansion, built circa 1720, in Kilcullen, Ireland. The pictures show a handsome 23-year-old winning at rugby; promoting Kerrygold, a national brand of butter, when he headed Ireland's dairy board; and in his official curriculum vitae, being knighted in 2001 by Queen Elizabeth for advancing peace in Northern Ireland. The Emerald Isle's richest man, the c.v. asserts, is "one of the world's premier business leaders."
He is, after all, the onetime chief executive of H.J. Heinz Co. (nyse: HNZ - news - people ), who presided over a market cap that rose from $900 million to $15 billion during his tenure (1979 to 1998). O'Reilly, now 66, led Heinz into 17 new markets, nearly quintupling overseas sales to $4.6 billion.
So how does he handle his own investments? Not quite as deftly. A tally of just his public holdings--a curious assortment of media, luxury goods and mining, as well as Heinz shares--shows losses of nearly $924 million on their $1.7 billion market value since 1998, a 54% decline. That compares with a 16% drop for the S&P 500 during the same period. When asked about his battered portfolio, O'Reilly responds with mock incredulity. "Excuse me!" he exclaims. "Tough times make good companies even better."
He would probably apply that old chestnut to people, as well. To appreciate how O'Reilly shaped his companies, beginning in the early 1970s, it helps to understand the forces that shaped the man. Despite the fact that he is a resident of the Bahamas presumably to avoid paying taxes to Dublin, O'Reilly is fiercely Irish and has carried the weight of all that implies since the days when Ireland was still the poor man of Europe. Add to that his discovery at age 15 that he was born out of wedlock to a father who was already married--his biological parents finally wed when O'Reilly was 38--and you've got the makings of someone with a more than average need to prove himself.
His first public victories were on the rugby field, where he held a scoring record and became an international star. He distinguished himself on campus, as well, earning an honors degree in civil law from University College Dublin and a doctorate in agricultural marketing from the University of Bradford in England. After his stint pushing butter exports, O'Reilly joined Heinz in 1969 as a managing director in London. Within three years he was called back to Pittsburgh headquarters to head up Heinz in North America and the Pacific, and in 1979 became the first non-Heinz family member to lead the company.
Along the way he pursued personal investments. He acquired companies, beginning with the Dublin-based Independent, a leading Irish newspaper, in 1973. That empire, now known as Independent News & Media Plc., grew to include more than 200 titles--including London's highly regarded Independent and papers throughout the U.K., South Africa, Australia and New Zealand. "What shaped his collection of investments as much as any factor was his belief that the Irish could succeed any place in the world," says D. Edward (Ted) Smyth, a senior vice president at Heinz and a longtime friend of O'Reilly's. The ink-and-paper business also gave him a chance to hobnob with the Tony Blairs and Nelson Mandelas of the world.
Public investors haven't fared as well. Independent shares were recently trading in London at $1.45, down from $5.50 two years ago. Last year the company made just $3.1 million on revenue of $1.3 billion. One excuse is that London's Independent gets brutal competition from papers owned by Rupert Murdoch, Conrad Black and Scott Trust, all of whom have deeper pockets than O'Reilly.
Then there is Independent News' mounting pile of debt--$1.4 billion, 1.7 times the market value of the common. One contributing factor is O'Reilly's purchase in 2000 of Northern Ireland's Belfast Telegraph for $487 million. The idea was to finance the acquisition with the sale of the Independent's 50% stake in the Irish cable company Chorus Communications. But when that fell through, O'Reilly bought the paper anyway. The company's interest bill was $101 million a year; its operating income (net before depreciation, dividends, interest and taxes) was only $136 million. "This explains the group's relatively weak ability to generate sufficient cash flow to materially pay down debt," according to Merrion Capital, the Dublin-based investment house. Donal Buggy, Independent's chief financial officer, responds that operating and debt-service costs are down and circulation sales are way up.
Some of the company's holdings are stuck in slow-growth or second-tier markets. That's one reason, grouses Tony's son Gavin (Independent's chief operating officer), "we've always traded at a discount." In this case, 12 times next year's projected earnings, compared with 21 for the New York Times Co., 12 to 16 times for Australian chains and as much as 13 times for U.K. companies.
Alas, O'Reilly hasn't done much better lately with his 25% ownership of Waterford Wedgwood Plc. (nasdaq: WATFZ - news - people ), his third-largest holding after Independent and Heinz stock. "Waterford is another company the Irish child grows up admiring," says Heinz's Smyth. (It was founded on the southern coast of Ireland.) After three years of negative operating results, O'Reilly rescued the 219-year-old maker of crystal and china in 1990, when he and Morgan Stanley came up with $160 million for a 30% share of the company. Within three years it was back in the black.
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