No, the above is not news, but you might be interested in whether or not an asset which you 100% own is being sold for the best price. This blogpost examines the sale.
First up, some history. Once upon a time, there was this organization which had a strange description for its activities – it was known as a “bancassurer” and its name was Irish Life and Permanent. The two main activities of this company were banking and life assurance. The bank was known to you all as Permanent TSB or PTSB and the life assurance company had a number of brands but you will have mostly known it as “Irish Life”.
Now, the media might have goaded you into thinking that Michael Fingleton and Sean Fitzpatrick were together solely responsible for the collapse in Irish banking. But that is rubbish. Not only has AIB needed a €20bn bailout, but to date, Irish Life and Permanent has needed €4bn, and the betting on here is that PTSB will need more. Not only that, but PTSB has been implicated in shenanigans at Anglo where €8bn of deposits were carouseled at year end to flatter the books of Anglo. But can you name the CEO and chairperson of Irish Life and Permanent in 2008? No? There’s a reminder of all the CEOs and chairpersons in the six state-guaranteed banks here.
And like the other basket cases on the Irish banking landscape, Irish Life and Permanent had its bad and less bad parts. The life assurance business is reasonably profitable and doesn’t have legacy liabilities on the scale of the bank; the bank, which was most prolific in offering tracker-rate mortgages during the noughties property booms in Ireland and England, which given the ECB main interest rate of 0.75% and the Bank of England base rate of 0.5% have turned out to be spectacularly loss-making. So what the Government did was divvied up the €4bn bailout, and it is the Government which now owns 100% of Irish Life and 99.5% of PTSB. The Government has been trying to flog Irish Life for two years but the prospects for the European and Irish economies has been so bad that no sale has progressed to a conclusion.
That is now set to change with the betting that Canadian life assurance company, Canada-West Life will seal the deal in what junior finance minister, Brian Hayes, recently said would be “the coming weeks”. Word on the street is that a deal will be announced by 28th February 2013 and that the sale price will be just over €1.3bn so the Government will claim a small profit on the transaction.
Are we getting the best price? Given the apparent change in sentiment after last week’s promissory note to sovereign bond exchange, should we hold out for several months to see if a markedly better price can be obtained? Should Irish Life be subdivided and sold as separate units?
In the Dail last week, the Sinn Fein finance spokesperson Pearse Doherty posed a series of parliamentary questions to the Minister for Finance, Michael Noonan. We didn’t learn very much but it seems that the “vampire squid” itself, Fine Gaeler, Peter Sutherland’s Goldman Sachs has been leading the sale since April 2011, a month after Minister Noonan was installed in the Department of Finance. Minister Noonan is not prepared to give us any detail on the sales and marketing process so that we might get some degree of confidence that the price has been maximized, and should any Department of Finance official leave to join the buyer in the coming months, then the safeguard against conflicts of interest is at a minimum a one-month notice period for some of the 10 NTMA secondees to the Department of Finance, and of course they must cross their hearts and hope to die before they disclose or act upon privileged information obtained during the course of their work at the Department of Finance.
These are the full parliamentary questions and responses.
Deputy Pearse Doherty: To ask the Minister for Finance the process adopted by him to sell Irish Life which has been purchased by the State for €1.3bn; the key dates in the selling process; the providers of any services to the State to facilitate the sale; the way the State can be satisfied that it will obtain the maximum price from the sale; and if he will make a statement on the matter.
Minister for Finance, Michael Noonan : As the Deputy will be aware Goldman Sachs has been retained to advise the State on matters relating to the sale of Irish Life since April 2011 and this engagement, details of which have already been disclosed, is continuing. As I have stated previously the State intends to dispose of its holding in Irish Life as soon as market conditions permit. If a sale was to arise I would expect to be advised by my Department and its advisers.
Deputy Pearse Doherty: To ask the Minister for Finance the most recent valuation of the State’s stake in Irish Life; the date on which the valuation was undertaken; if any persons outside his Department assisted in the valuation and if so, the names of same and the quantum of any fees paid for any external valuation..
Minister for Finance, Michael Noonan: As I stated in response to PQ 51139/12, the State paid consideration of €1.3 billion to acquire a 100% interest in Irish Life in June 2012. The shares are held at this value in the Finance Accounts and do not get revalued on a regular basis.
In arriving at the consideration agreed in March 2012, information available to us from the sale process which was postponed in late 2011 was reviewed. A review was also undertaken of developments since that time in Irish Life and the Irish economy, movements in industry peer group valuation multiples and improvements in bond yields, particularly in Ireland. As you would expect I received advice from my officials on the valuation of Irish Life ahead of its acquisition in June 2012. In addition advice was also provided to my Department by Goldman Sachs who have been providing advice since 2011 in relation to Irish Life. This engagement has continued to date but no additional fees over and above those already disclosed have been incurred.
Deputy Pearse Doherty: To ask the Minister for Finance the personnel responsible for negotiating on behalf of the State the sale of Irish Life, and if he will list their relevant qualifications and experience..
Minister for Finance, Michael Noonan : I will not refer to specific personnel but I can confirm that the State’s investment in Irish Life is managed by officials within my Department.
Deputy Pearse Doherty: To ask the Minister for Finance the safeguards that exist to prevent staff in his Department involved in the sale of Irish Life, moving to work for the new buyer of Irish Life.
Minister for Finance, Michael Noonan : In accordance with the Ethics Acts (i.e. Ethics in Public Office Act 1995, Standards in Public Office Act 2001), any civil servant intending to be engaged in or connected with (i) any outside business with which he or she had official dealings or (ii) any outside business that might gain an unfair advantage over its competitors by employing him or her, must inform the appropriate authority of such an intention (the appropriate authority for civil servants in my Department below Assistant Secretary level is the Secretary General, and those above Assistant Secretary level must apply to the Outside Appointments Board). Further details may be found at http://sipo.gov.ie/en/CodesofConduct/
Additionally, civil servants who hold positions which are designated positions for the purposes of the Ethics Acts shall not, within twelve months of resigning or retiring from the civil service accept an offer of appointment from an employer outside the civil service or accept an engagement in a particular consultancy project where the nature and terms of such appointment or engagement could lead to a conflict of interest, without first obtaining approval from the appropriate authority as outlined above. Even where the twelve months moratorium has elapsed, or where for other reasons approval is not required before taking up outside employment, former civil servants must continue to observe the restrictions imposed by the Official Secrets Act 1963, as amended by the Freedom of Information Acts.
With regard to staff seconded from the National Treasury Management Agency (NTMA) to work in the Department’s Shareholder Management Unit on the sale of Irish Life, I am informed by the NTMA that its employees have notice periods of one or three months (and 6 months in the case of the Chief Executive). All NTMA employees are subject to section 14 of the National Treasury Management Agency Act, 1990 which prohibits an employee from disclosing any information obtained while carrying out their duties as employees of the NTMA. NTMA employees are also subject to the Official Secrets Act. Contravention of the NTMA Act and the Official Secrets Act is a criminal offence and the prohibition on disclosing confidential information applies indefinitely and extends to former employees.
UPDATE: 19th February 2013. Minister for Finance Michael Noonan has this afternoon issued a statement in which he said that Irish Life has been sold to Great West in a deal worth €1.34bn comprising €1.3bn sale proceeds and €40m pre-sale special dividend. The sale is conditional on regulatory approval which shouldn’t be an issue.