Coolmore article
John Magnier doesn't do climbdowns. Conflict resolution comes in the shape of complete and utter victory for the normally publicityshy Corkman. Get in the way of the Coolmore boss and you're likely to get trampled upon.
"They don't have a gradualist approach. They go nuclear very quickly," said one party that has dealings with Coolmore.
Take the example of John Messara, formerly the largest stallion operator in Australia.Ten years ago, Messara fell out with Magnier over a "shuttle" stallion called Danehill. The majority owner, with a 60 per cent share, Messara wanted to rest Danehill, who had been travelling back and forth across the world for the summer breeding seasons in Europe and Australia.
Magnier,who held only 13.5 per cent of the stallion rights, had obtained 50 per cent management control of the horse. There would be no idle summer for the stallion.
The dispute was resolved in an extraordinary manner. A former judge, Sir Laurence Street, was engaged to preside over a private auction.With the two parties in separate rooms, the judge shuttled back and forth across the corridor no fewer than 27 times before Magnier emerged victorious with a bid of Aus$23 million (e14 million) for the stallion.
Danehill provides a link to the present dispute between Magnier and Manchester United manager Alex Ferguson.The stallion is the father of Rockof Gibraltar. Like father, like son.
A date in the High Court holds few attractions for Magnier. Going to court would simply publicise Coolmore's operations as never before. It would invite a level of scrutiny of the secretive world of the bloodstock industry comparable to Magnier's request for openness and transparency at the publicly-quoted Manchester United.
At the heart of the dispute between Magnier and Ferguson is the question of rights to stud fees. Is it the practice in the industry to gift a racing share in a racehorse but not its stud rights? If it is, Magnier will have to prove it in court, which will mean opening up to the world how Coolmore does its business.
Lawyers will pore over what is custom and practice in the industry, and some of the ownership customs and practices in the bloodstock industry are strange indeed.
The buying and selling of horses at auction is a peculiar practice. Auction catalogues do not provide information on the ownership of horses being sold. In some cases, it is believed that owners buy their own horses at auction to set a benchmark price for the offspring of their stallions.There is no suggestion that Coolmore has ever acted improperly in relation to the buying or selling of horses.
The business is further complicated by the practice known as foalshare, when a breeder sends a mare to a stallion. No fee is charged for the stallion's service and in return, the owner of the stallion receives a share in the foal. This further complicates the ownership structure when horses are sent to auction.
"There are a lot of gentleman's agreements," said one source. "Issues of ownership are complicated by the use of foalshares and mareshares. There isn't a lot of documentation, because people in the business don't want to get deluged in paperwork - for whatever reason. It may warrant the attention of the Competition Authority."
Court cases also have a habit of taking on a life of their own. Pandora's box,once opened, has a tendency to reveal surprises. A court case could raise questions about the ownership of Coolmore itself. Very little is known of the beneficial owners of the stud operation. The ultimate holding companies appear to be Zurich firm Calogo Bloodstock, and Bemak, a company based in the Netherlands Antilles. There are also interests in an Isle of Man company called Linley Investments.
It is believed that part-founder and expools millionaire Robert Sangster has sold much of his shareholding. Magnier's father-in-law, legendary trainer Vincent O'Brien, may also have reduced his shareholding. Did Magnier buy everything from the sellers or were there new investors? The bulkof the accrued wealth from the bloodstock business, in any case, is believed to have been transferred to a series of trusts for Magnier's five children.
Perhaps most potentially damaging for Coolmore, a high-profile court case would focus national and international attention on the massive tax breaks it has enjoyed for over 30 years.
Former finance minister Charlie Haughey's introduction of stallion stud fees exemption in 1969 has saved Coolmore tens of millions in tax.
Like other stud operations in Ireland, Coolmore has never had to file an annual tax return, but that is about to change. The Department of Finance is ostensibly conducting a review of the stallion tax exemption. An amendment to the 2003 Finance Act requires stallion operators to file an annual return for the period from January 1, 2004.
Companies do not have to file the return until nine months after the end of their financial year. Those companies with a fiscal year ending December 31 will not have to file an annual return until September next year.This means that a comprehensive review of the industry is unlikely to be ready in time for the 2006 Budget in December 2005. In effect, changes to the tax-free stallion status will not come into effect until January 2007 at the earliest - if at all.
A court date scheduled for next year would keep the issue on the political agenda just as the Department of Finance begins to reassess the tax break.
The bloodstock business may also come under scrutiny from other sources. Since the legislative changes introduced on January 1, the Revenue Commissioners have begun to look at the entire bloodstock and stallion industry. The Revenue should have some knowledge of the industry, as Vat is applied at the farming rate of 4.4 per cent.
The Department of Finance review should go some way towards ascertaining Coolmore's market share. It reputedly has a near-monopoly position in the Irish market. The tax exemption introduced by Haughey was designed to assist the fledgling bloodstock industry but, as the largest operator in the world, Coolmore can no longer be described as "fledgling".
Last week, Manchester United fans began a campaign of letters to British MEPs and the EU Commission complaining that the Irish stallion tax exemption amounted to state aid.
Going to court increases the risk for Magnier in respect of all these issues. It's a questionable strategy. What isn't open to question is how extensively Coolmore has benefited from the most generous tax breaks in the world.With the undisputed business brilliance of Magnier and the expertise of his team,the tax breaks have helped to make Coolmore a superpower in the stud business.
Rather like the Irish building materials group CRH, which created a nearmonopolistic presence in the cement business, Coolmore's domination of the domestic market has enabled it to forge increasingly powerful positions overseas.
Annual revenues at Coolmore are conservatively estimated at €150 million, produced by 50 of the world's most desirable stallions on over 10,000 acres of prime stud farm land. Even the combined forces of the Saudi al-Maktoum family - flush with oil money to fund its Darley and Godolphin stud operations - fall behind the Coolmore operation for scale and expertise.
"It is very difficult for anyone who wants to stand a stallion to compete with Coolmore," said Tony Morris, breeding editor of the Racing Post. "Many people in the game acknowledge that Magnier is a very shrewd operator and that he has outstanding people working for him. But their dominance is not necessarily good for everyone else."
In Australia, Coolmore is by far the largest single player in the market, having displaced Messara's Arrowfield Stud and the Woodlands Stud, which belongs to the poultry millionaire Ingham brothers. Coolmore supplements about 15 local stallions with five "shuttle" stallions, including Rock of Gibraltar. Annual feeincomeis estimated at Aus$50-60 million (e30-36 million)..........
John Magnier doesn't do climbdowns. Conflict resolution comes in the shape of complete and utter victory for the normally publicityshy Corkman. Get in the way of the Coolmore boss and you're likely to get trampled upon.
"They don't have a gradualist approach. They go nuclear very quickly," said one party that has dealings with Coolmore.
Take the example of John Messara, formerly the largest stallion operator in Australia.Ten years ago, Messara fell out with Magnier over a "shuttle" stallion called Danehill. The majority owner, with a 60 per cent share, Messara wanted to rest Danehill, who had been travelling back and forth across the world for the summer breeding seasons in Europe and Australia.
Magnier,who held only 13.5 per cent of the stallion rights, had obtained 50 per cent management control of the horse. There would be no idle summer for the stallion.
The dispute was resolved in an extraordinary manner. A former judge, Sir Laurence Street, was engaged to preside over a private auction.With the two parties in separate rooms, the judge shuttled back and forth across the corridor no fewer than 27 times before Magnier emerged victorious with a bid of Aus$23 million (e14 million) for the stallion.
Danehill provides a link to the present dispute between Magnier and Manchester United manager Alex Ferguson.The stallion is the father of Rockof Gibraltar. Like father, like son.
A date in the High Court holds few attractions for Magnier. Going to court would simply publicise Coolmore's operations as never before. It would invite a level of scrutiny of the secretive world of the bloodstock industry comparable to Magnier's request for openness and transparency at the publicly-quoted Manchester United.
At the heart of the dispute between Magnier and Ferguson is the question of rights to stud fees. Is it the practice in the industry to gift a racing share in a racehorse but not its stud rights? If it is, Magnier will have to prove it in court, which will mean opening up to the world how Coolmore does its business.
Lawyers will pore over what is custom and practice in the industry, and some of the ownership customs and practices in the bloodstock industry are strange indeed.
The buying and selling of horses at auction is a peculiar practice. Auction catalogues do not provide information on the ownership of horses being sold. In some cases, it is believed that owners buy their own horses at auction to set a benchmark price for the offspring of their stallions.There is no suggestion that Coolmore has ever acted improperly in relation to the buying or selling of horses.
The business is further complicated by the practice known as foalshare, when a breeder sends a mare to a stallion. No fee is charged for the stallion's service and in return, the owner of the stallion receives a share in the foal. This further complicates the ownership structure when horses are sent to auction.
"There are a lot of gentleman's agreements," said one source. "Issues of ownership are complicated by the use of foalshares and mareshares. There isn't a lot of documentation, because people in the business don't want to get deluged in paperwork - for whatever reason. It may warrant the attention of the Competition Authority."
Court cases also have a habit of taking on a life of their own. Pandora's box,once opened, has a tendency to reveal surprises. A court case could raise questions about the ownership of Coolmore itself. Very little is known of the beneficial owners of the stud operation. The ultimate holding companies appear to be Zurich firm Calogo Bloodstock, and Bemak, a company based in the Netherlands Antilles. There are also interests in an Isle of Man company called Linley Investments.
It is believed that part-founder and expools millionaire Robert Sangster has sold much of his shareholding. Magnier's father-in-law, legendary trainer Vincent O'Brien, may also have reduced his shareholding. Did Magnier buy everything from the sellers or were there new investors? The bulkof the accrued wealth from the bloodstock business, in any case, is believed to have been transferred to a series of trusts for Magnier's five children.
Perhaps most potentially damaging for Coolmore, a high-profile court case would focus national and international attention on the massive tax breaks it has enjoyed for over 30 years.
Former finance minister Charlie Haughey's introduction of stallion stud fees exemption in 1969 has saved Coolmore tens of millions in tax.
Like other stud operations in Ireland, Coolmore has never had to file an annual tax return, but that is about to change. The Department of Finance is ostensibly conducting a review of the stallion tax exemption. An amendment to the 2003 Finance Act requires stallion operators to file an annual return for the period from January 1, 2004.
Companies do not have to file the return until nine months after the end of their financial year. Those companies with a fiscal year ending December 31 will not have to file an annual return until September next year.This means that a comprehensive review of the industry is unlikely to be ready in time for the 2006 Budget in December 2005. In effect, changes to the tax-free stallion status will not come into effect until January 2007 at the earliest - if at all.
A court date scheduled for next year would keep the issue on the political agenda just as the Department of Finance begins to reassess the tax break.
The bloodstock business may also come under scrutiny from other sources. Since the legislative changes introduced on January 1, the Revenue Commissioners have begun to look at the entire bloodstock and stallion industry. The Revenue should have some knowledge of the industry, as Vat is applied at the farming rate of 4.4 per cent.
The Department of Finance review should go some way towards ascertaining Coolmore's market share. It reputedly has a near-monopoly position in the Irish market. The tax exemption introduced by Haughey was designed to assist the fledgling bloodstock industry but, as the largest operator in the world, Coolmore can no longer be described as "fledgling".
Last week, Manchester United fans began a campaign of letters to British MEPs and the EU Commission complaining that the Irish stallion tax exemption amounted to state aid.
Going to court increases the risk for Magnier in respect of all these issues. It's a questionable strategy. What isn't open to question is how extensively Coolmore has benefited from the most generous tax breaks in the world.With the undisputed business brilliance of Magnier and the expertise of his team,the tax breaks have helped to make Coolmore a superpower in the stud business.
Rather like the Irish building materials group CRH, which created a nearmonopolistic presence in the cement business, Coolmore's domination of the domestic market has enabled it to forge increasingly powerful positions overseas.
Annual revenues at Coolmore are conservatively estimated at €150 million, produced by 50 of the world's most desirable stallions on over 10,000 acres of prime stud farm land. Even the combined forces of the Saudi al-Maktoum family - flush with oil money to fund its Darley and Godolphin stud operations - fall behind the Coolmore operation for scale and expertise.
"It is very difficult for anyone who wants to stand a stallion to compete with Coolmore," said Tony Morris, breeding editor of the Racing Post. "Many people in the game acknowledge that Magnier is a very shrewd operator and that he has outstanding people working for him. But their dominance is not necessarily good for everyone else."
In Australia, Coolmore is by far the largest single player in the market, having displaced Messara's Arrowfield Stud and the Woodlands Stud, which belongs to the poultry millionaire Ingham brothers. Coolmore supplements about 15 local stallions with five "shuttle" stallions, including Rock of Gibraltar. Annual feeincomeis estimated at Aus$50-60 million (e30-36 million)..........
