LUNCH WITH "HEINZ"

Lunch with the FT: The life of O’ReillyBy David Wighton

Published: June 9 2006 12:20

I instinctively knew what lunch with Sir Anthony O’Reilly would be like. A long, boozy affair in a steak house, full of tales and gags from his 50 years in sport and business, washed down with a bottle of red wine and possibly a pint of Guinness.

So much for instinct. I got the tales and the gags, all right. But in place of the red wine it was diet Coke. And instead of the steak house, O’Reilly chose Le Bernardin, a three Michelin star restaurant in midtown Manhattan that serves exquisite seafood, in exquisitely small portions.
It turns out that while Ireland’s first billionaire is a lover of the good things in life and has the impressive frame of a former international rugby player to fill, he is pretty abstemious, especially at lunchtime.
As he glances at a menu he knows well, he refers to the restaurant’s habit of serving amuse-bouche morsels you haven’t ordered between courses. “You ask for two courses and they produce seven. So you get the impression you’re dieting when you’re actually gorging.” Unfortunately, today the amuses-bouches are off.
Before the waiter takes the order, O’Reilly reminds me of his extraordinary CV. A dazzling career in international rugby, two decades running one of the most famous names in American industry, HJ Heinz, and the creation of his own business empire spanning newspapers to fine china, hotels to oil, and telecoms to zinc.
We start talking about South Africa, which O’Reilly first visited in 1955 when, at the age of 18, he played for the British and Irish Lions against the South African Springboks. The series began with a game at Ellis Park in Johannesburg where, in front of the biggest crowd that had ever watched a rugby match, O’Reilly scored to help the Lions to a famous victory.
Among the 95,000-strong crowd supporting the home team there was a small black contingent cheering for the Lions. “There were about seven of them. Including Nelson Mandela.”
It was not until decades later that O’Reilly got to know Mandela, whom he describes as “a magisterial figure sent by God”. According to O’Reilly, the former South African president likes to joke about the Irishman’s long, some would say overlong, rugby career. “When I went into prison in 1962 Tony was playing for Ireland. And when I came out of prison, Tony was still playing for Ireland,” says O’Reilly, doing an excellent Mandela impression.
O’Reilly was introduced to Mandela by Robert Mugabe, the president of Zimbabwe, whom he met in 1983 when he was looking to expand Heinz into developing markets. “I had found out Mugabe had been educated at the Chikuni Jesuit mission in Zambia by Father O’Haodha, who had taught me mathematics at Belvedere College in Dublin.”
When he mentioned the bizarre connection at their first meeting, Mugabe was startled: “What is this that you are saying? I must go and get my mother,” mimics O’Reilly. Mugabe’s mother duly appeared whooping with excitement and quizzed O’Reilly for two hours. “The first really important negotiation I have in Zimbabwe is with the mother, with the feared Marxist sitting in the corner like a little boy.” (O’Reilly also does an impression of Mugabe’s mother, the accuracy of which I cannot vouch for.)
The subsequent joint venture with the Zimbabwean government was one of many O’Reilly deals where personal chemistry appears to have been critical. “A role for chief executives is to look at spreadsheets but also to look in the eyes of the people you are going to deal with.”
The chemistry was also important in O’Reilly’s most recent coup, the agreement to buy a minority stake in the publisher of Dainik Jagran, an Indian newspaper with a daily readership of more than 20 million. O’Reilly got government agreement for the $27m investment last summer and promptly doubled his money when the company went public in February.
The deal followed years of negotiation with the owning Gupta family. “We had to talk at great length with the Guptas, which means talking to an annual meeting in permanent session with 8,000 people all called Gupta.”
Knowing the people you are going to be dealing with is particularly important in developing markets, says O’Reilly. “You pick the wrong man in Russia and you’re toast.”
O’Reilly is bullish about the opportunities in Russia and for further investment in India. But, bruised by an earlier experience with Heinz, he is steering clear of China.
O’Reilly took Heinz into China in 1986 and all was going well until “faceless people in Beijing” intervened. “Suddenly our recipes were stolen and suddenly counterfeit products started to appear. In four years we learned the Chinese lesson which is that it is very hard to have personal relations.”
He says he will have no interest in Chinese media markets until it becomes a democracy. “Rupert Murdoch, who is a tenacious man of the highest order, has been unable to break down the barriers.”
Murdoch’s name comes up often and O’Reilly puts him at the top of the list of business figures he admires. The two have many things in common, including the accusation that they treat public companies with outside shareholders as family businesses. Although two of O’Reilly’s sons have senior positions in the public companies he runs he insists that the charges are unfair. “I’m not dynastic and I don’t think my children are dynastic.”
He points to the fact that his eldest son Cameron, who was widely expected to take over the Independent News & Media newspaper business, quit six years ago to do his own thing in Australia. “I am immensely proud of him.”
O’Reilly and Murdoch are direct competitors in the UK national newspaper market where they own two of the five quality dailies, The Independent and The Times respectively. O’Reilly bought the respected but financially challenged Independent in 1995 and despite severe cost-cutting and a highly successful move to a tabloid format has failed to stem its losses. “The Independent pays its way intellectually. It defines our group,” says O’Reilly, arguing that the losses offset profits from The Belfast Telegraph which means the group pays no UK tax. “It absolutely doesn’t hurt.”
O’Reilly describes the UK newspaper market as “dysfunctional” because the cover prices are still too low, despite big increases in the past year. He says the price of the Financial Times should be ₤1.50 and The Independent ₤1 (compared with ₤1 and 70p now). “It will happen,” he declares.
Driven by its booming operations in South Africa, the group grew strongly in 2005 and its share price has doubled in the past three years, a performance most newspaper businesses around the world can only dream of.
As an investor, Independent News has been O’Reilly’s biggest winner, showing a 430-fold return on money put into the group on his takeover in 1973. But asked to name his proudest achievements he cites his time at Heinz and the launch at the age of 26 of Kerrygold, the brand that put the Irish dairy industry on the world map. He says he persuaded the Irish Dairy Board’s ancient members of the benefits of marketing by having “two of the most divine girls you’ve ever seen in your life wearing tight Irish linen blouses and short green skirts” ushered into the room. “You could hear glands that hadn’t worked for 40 years creaking into action again. The chairman turned to me and said: ‘If this is marketing, Tony, I’m all for it.’”
As for his time at Heinz, “climbing the slippery ladder in America to become chairman and chief executive and to do that for 25 years, delivering 19 per cent growth - that is very satisfying”.
Not everything has gone right for O’Reilly. Over the past few years he has poured millions of his own and public shareholders’ money into Waterford Wedgwood, in an attempt to turn around the Irish china and crystal producer. According to O’Reilly this point is, as ever, just around the corner and he remains convinced of the company’s long-term value.
“It is the largest table top company in the world with unparalleled brand names. And I am a great believer in brand names. If the Chinese were ever to approach the world market in other than basic, fungible products they are going to have to do what Lenovo has done with IBM,” he says, referring to the Chinese company’s acquisition of IBM’s personal computer brand. Might Waterford Wedgwood be snapped up by the Chinese one day? “Could be.”
O’Reilly was awarded a British knighthood in 2001 for his contribution to Ireland, north and south, particularly his co-founding of the Ireland Funds which have raised more than $300m from Irish expatriates for projects on both sides of the border. His latest initiative is a campaign to persuade the UK government to slash the 30 per cent main rate of corporation tax in the north to the 12.5 per cent level in the Republic.
To O’Reilly it is clear that it was the Republic’s corporate tax policy that was behind the country’s economic miracle. “It’s not because the pubs are great, the golf is great and the climate is, well... The fact is, it’s tax.”
O’Reilly had recently been to see Gordon Brown, the UK chancellor, to press the case. Another former rugby player, Brown was “charming” but “extremely guarded, obviously”. O’Reilly says he pointed out that the proposal has been blessed by all sides, north and south - “this is a unanimity Ireland has never showed in its entire history” - and that it represented a one-off opportunity to create an “island of Ireland economy” and help bring to an end the “undeclared civil war” in the north.
After the waiter clears away the main course plates, cleaned of every crumb in my case, the ever-charming O’Reilly insists on changing the subject to me. Fascinating though this is, I by now have a serious problem. I am starving. But O’Reilly insists he wants no more than a cup of tea.
As we leave the restaurant, he explains that he is off to his pile in the Bahamas for dinner with Johann Rupert, the South African luxury goods magnate. I shake his hand, thank him for a hilarious couple of hours, and head off in search of a Mars Bar.
David Wighton is the FT’s New York bureau chief.
Le Bernardin, New York
1 x mesclun salad
1 x langoustine ravioli
1 x black bass
1 x monkfish
1 x sparkling water
1 x diet Coke
2 x Earl Grey tea
Total: $137.09