The Ikea store that towers over the M50 motorway on the outskirts of north Dublin – the Republic’s only flagship “big blue box” store, in the Swedish-founded furniture retailer’s jargon – opened in 2009. Its construction came after years of political agonising over changes to planning rules, eventually introduced by the Fianna Fáil government in 2005 to allow a store five times larger than the then maximum regulated size.

The debate centred around the opportunity to bring the retail multinational to the state for the first time, especially in the Ballymun area, which had been largely bypassed by the Celtic Tiger boom in business and employment opportunities. 

What did not transpire in discussions at the time was that the group behind the new Ikea store was already present in Dublin, and had been for many years. The value of its business in Ireland was much larger than any retail assets it could ever base in the country, and it still is – by a factor of several hundred. 

Based on company documents obtained in Ireland and in the Netherlands, this investigation opens the door to the low-key Dublin office tasked with looking after the accumulated profits patiently amassed by hundreds of furniture stores worldwide.

From a discreet building in Ballsbridge, a few dozen staff running the Ingka Group’s international bank and financial investment fund now manage over €30 billion in liquid assets – and counting. In balance sheet terms, this is a larger financial institution than Permanent TSB, or Ulster Bank Ireland prior to its wind-down. 

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Dublin’s International Financial Services Centre (IFSC) opened in 1987, offering a new EU home to banks and fund managers. The main incentive introduced by Charles Haughey’s government to lure them to the new office blocks that had begun to replace old warehouses in the Docklands was a special 10 per cent corporation tax rate. Hundreds of financial institutions, from investment banks to aircraft lessors, signed up for the IFSC package. 

In 1992, however, a different kind of customer established an Irish branch at AIB’s International Centre in the IFSC. The company, Ingka Holding Europe Subholding III BV, was incorporated in the Netherlands. It later changed its name to Ikea Financial Assets BV and reported its sole activity as operating its Dublin branch.

Early filings indicate that its business was “the active management of group liquidity including co-ordinating inter-group funding needs, using equity and loans from the Company which have been allocated to the Branch”. By the time it filed its first accounts in Ireland in 1995, it was handling the equivalent of €646 million in assets.

In the summer of 2001, Fami Ltd, a new, fully Irish-incorporated company, replaced the Dutch-owned branch in AIB’s IFSC building opposite Busáras. It started with a much smaller pile of intercompany treasury loans than its predecessor but quickly ramped up activity. Thanks to the continuity established between the two successive companies, Fami enjoyed the 10 per cent corporation tax rate until 2005, the maximum extension Ireland had negotiated with the European Commission for the earliest adopters of the IFSC. 

By then, Fami’s balance sheet had grown to €1 billion. At that point, it held no cash or securities of its own and simply balanced intercompany debt between various group companies around the world, surfacing the difference as Irish taxable income. In 2005, as politicians were debating the merits of allowing a 30,000 sq.m. warehouse store in Ballymun, €6.3 million in Ikea profit was shifted to Ireland in this way and triggered a corresponding €628,408 tax charge – in the last year of the IFSC’s reduced tax rate.

Fami then began to store the Ingka Group’s accumulated profits in short-term investments, such as US treasury bonds. In 2016, it established a subsidiary to manage the US dollar portion of this bond pile. Three years later, as this liquidity management business grew into tens of billions of dollars and became more sophisticated, the structure finally morphed into the one we know today, with two dedicated Ingka Investments Financial Assets companies and one additional subsidiary dedicated to foreign exchange risk management, Ingka FX.

The growing Dublin structure introduced an Irish layer into Ikea’s famously tax-efficient, Dutch-based corporate maze. Since the early 1980s, the furniture retailer’s Swedish founder, Ingvar Kamprad, had been developing a self-sustaining ownership model for the group he had founded in 1943, aged 17. It is made up of two distinct multinational corporations. 

The Ikea brand, designs, and supply chain sit in the Inter-Ikea Group, which manufactures its products and charges a 3 per cent fee on all retail sales. That part of the business is now owned by a Liechtenstein-based entity, the Interogo Foundation, and does not report a corporate presence in Ireland.

All Ikea stores – and, increasingly, the brand’s other retail outlets such as its click-and-collect location in Carrickmines, its kitchen design consultation rooms in Dublin city centre and Naas, and e-commerce websites – are run by franchisees of the Inter-Ikea Group.

Of more than 500 retail locations worldwide last year, the Kamprad-founded Ingka Group was by far the largest Ikea franchisee in the world, with 465 in its portfolio. While Inter-Ikea has allocated some of the harder-to-crack national markets to local franchisees, especially in the Middle East, the Ingka Group is the exclusive Ikea distributor in 32 countries covering most of Europe (including Ireland), North America, China, Japan, South Korea, India and Australia. Ikea retail is the group’s workhorse, accounting for over 90 per cent of its revenue.

Ingka “stopped” its Russian retail operation on March 3 and announced in June that it would reduce its workforce and sell out its remaining inventory there, but has stopped short of leaving the country entirely. In fact, the group remains very much active in Russia through the 14 shopping centres it owns there under the Mega brand.

Russia is by far the largest market for its commercial property division, Ingka Centres, which specialises in developing and leasing out “meeting places” anchored by its own Ikea stores. The group had its investment properties valued at €9.6 billion in 2021, though it conservatively reports only half of this on its books. They generated €849 million in rental income from third-party tenants last year.

The third leg of the stool, Ingka Investments, is the group’s internal fund manager. It “strengthens long-term growth, secures our financial position and supports sustainability goals by making responsible investments in people and businesses,” according to group accounts. “Ingka Investments’ activities are organised in six portfolios: Business Development Investments, Prioritised Cities ReaI Estate Investments, Venture & Growth CapitaI, RenewabIe Energy Investments, Forestland Investments and Financial Markets Investments.”

Ingka Investments’ venture capital and renewables businesses are the one the group likes to communicate about. It has spent €2.5 billion to date on solar and wind farms, including the acquisition of the Carrickeeny wind farm in Co Leitrim. Its forestry investments, meanwhile, combine environmental credentials and timber sourcing benefits. None of these forests are in Ireland.

Ingka Investments has also taken minority stakes in various start-ups associated with Ikea’s business, from electric vehicle deliveries to fintech – including Ikano Bank, which offers consumer loans inside stores and is in the process of being bought by Ingka from the Kamprad family.

While much publicised, these VC investments totalled only €200 million last year and have yet to return a profit. By contrast, the group funds placed by Ingka Investments on financial markets are 100 times larger – and this is the business located in Ireland.

The mid-2010s were record years for the Ingka Group. In 2015, global revenue exceeded €30 billion for the first time, generated nearly entirely by its Ikea stores. The following year, net profit crossed the €4 billion mark. This was the only recent period when the group paid dividends to the Ingka Foundation.

It could afford to: Total assets were then well above €50 billion, and with very little debt, the Ingka Group reported a net equity value of over €40 billion for the first time in 2018. “Our financial approach is based on 75 years of earning money before we spend it, which allows us to be financially independent and purpose-driven in our decisions,” the group reports year after year. Current Ingka management attribute this aversion to borrowing to founder Kamprad himself. “We think in generations, not quarters, and invest in the long-term good of our customers, our business, people, society and our planet,” they add.

As profits accumulated, despite multi-billion annual investments in new and improved stores, the Ingka Group sat on a growing war chest. By August 2019, it had a cash reserve of €1.4 billion and another €21.2 billion in securities.

That year, it perfected the Irish structure tasked with looking after these liquidities. Ingka Investments Financial Assets Ireland Ltd, a new subsidiary held directly by the group’s head office in The Netherlands, was established at Fami’s existing office in the 23 Shelbourne Rd building and immediately received a €14.3 billion capital allocation. It has since reported the group’s entire liquidity investment business in euro.

Around the same time, Fami’s existing dollar-denominated cash and securities management unit became a subsidiary of the new company and changed its name to Ingka Investments Financial Assets Dublin Ltd. 

The Ingka Group’s Dublin office as we know it today was in place. The two Financial Assets companies acted as its worldwide liquidity investment funds, one in euro and one in dollars. Fami, meanwhile, continued in its role as internal bank, pooling cash and providing credit intermediation services between various group companies.

Ikea’s omnichannel “transformation”

The redefined Irish financial centre of the Ingka Group has found itself supporting its core retail at a delicate juncture. Even before Covid-19 shut down its stores, the Ikea empire, like all traditional retailers, was shaking. From a peak in 2016, the Ingka Group’s profitability started to decline, while revenue growth slowed down.

The group had seen this shift coming, where consumers would move away from its flagship big blue box, suburban stores accessible only by car – especially in the older markets it has been serving. Company documents signal an “ongoing transformation to go all the way in establishing an affordable, accessible and sustainable omnichannel Ikea that delivers the profitability we need for future resilience”.

In plain English, this means investing not only in more and better stores, but also in new retail formats at more expensive city-centre locations and online. It also means a growing strand of marketing centred on environmental, social and governance (ESG) credentials with better reportable results on staff welfare, energy and materials sourcing, etc. 

Then the pandemic hit, causing the same scramble for cash at Ingka as it did in other businesses hit by lockdowns. The group’s revenue fell by €1.6 billion in 2020 and its pre-tax profit by €1 billion. All the while, it also reduced whatever small debt it had to insignificance – long-term borrowings now represent less than one per cent of its balance sheet.

For the past five years, this has translated into a policy whereby the Ingka Group has stopped paying dividends and used Ingka Investment’s Irish-based financial assets division to manage liquidity more actively – not only adding to a constantly growing pile, but offering a crucial buffer where money can be added or withdrawn flexibly as the unpredictability of a changing retail industry unfolds, while ticking an increasing number of ESG boxes.

For the first time, 2017 saw the Ingka Group take funds out of its peak €23 billion stash of cash and marketable securities to re-invest in its business (it had dipped in the pot before, but only to pay dividends). Since then, the amount under management in Dublin has fluctuated up and down by a billion or two each year as deeper investment in the group’s omnichannel transformation continued, regardless of pandemic-induced swings in revenues and profits between stores and e-commerce.

The latest accounts for the group’s four financial management companies in Ballsbridge were made up to the end of August 2021. Together, Fami, Ingka FX and the two Ingka Investment Financial Assets companies (Ireland and Dublin) held €28.7 billion in combined net Ingka Group assets at the time.

Since then, in March of this year, Ingka Investment’s Irish office received another €1.9 billion in capital to manage, pushing the group’s assets under management in Dublin over the €30 billion mark. This does not mean that this cash and securities are placed with Irish financial institutions – the main bank for all companies involved is HSBC in London, and several Irish units report using other investment banks across Europe. But when it comes to corporate responsibility and tax, the Irish subsidiaries are in charge.

Further reading

Part 2: From furniture stores to sovereign bonds, intercompany debt and tax