Hg, or Mercury Asset Management as it was known, sold out of the glass-manufacturing arm, taking 1.10 per share in cash. It stayed in the distribution company, a rather useless-looking shell.
Hg looked none too clever when the glass-manufacturing company then went on an acquisition spree in Germany, and Paul Coulson, the financier, offered preference shareholders 4 apiece to sell out.
The rump Ardagh shares were valued at just 10c at the time of the demerger. Now called South Wharf, the shares closed at 5.50 last Friday, after the company agreed a deal with Dublin Port on the development of the old glass factory in Ringsend. It represented a two-year gain of 5,000%.
The huge jump in value arises from a legal loophole that potentially allowed South Wharf to buy the property from Dublin Port for 1m. To avoid lengthy litigation, the Port and South Wharf agreed to share the proceeds of the valuable site.
South Wharfs interest in the glass factory is estimated to be worth at least 200m. At the time of the demerger, the lease interest was valued at just 10m in the Ardagh accounts.
What shrewd forebearance of Hg to remain as an investor. Its South Wharf shares are worth close to 60m, having cost the equivalent of £49,000 (71,000) in 1992. Ardagh shareholders, including many former workers at the Dublin glass factory, who checked out in 2004 must be miserable.
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Irish Agenda: Mercury Rising on Ardaghs Hot Docklands Property Deal
When Ardagh demerged into glass-making and distribution businesses in 2004, everybody assumed the British venture capitalist Hg Capital had backed the wrong horse.