Cantillon

Inside the world of business

Cantor's Dolmen takeover will add spice

It’s taken more than a year to close but barring a late hiccup it appears that Dolmen Stockbrokers takeover by Cantor Fitzgerald will happen in the next week or two.

Various technical and regulatory issues that surround financial mergers these days are thought to be the main reason why the deal has taken so long to consummate.

Cantor is believed to have also eyed up Seán Quinn-backed NCB Stockbrokers.In the end, NCB did its own deal with South African bank Investec.

Dolmen chief Ronan Reid is expected to manage the business in Dublin but the name is likely to change to Cantor Fitzgerald Ireland. We can also expect Cantor to appoint a couple of senior executives to the Irish company’s board.

We can take it as read that Cantor sees an opportunity in Ireland by executing this deal and there is every expectation that the business will grow over time. Indeed, Dolmen has been recruiting new staff in the past year or so.

Cantor’s arrival here will no doubt be cited as an endorsement of Ireland’s improved image overseas.

Cantor’s arrival might prove to be well timed. After three dreadful years, there is evidence international investors are once again keen to buy assets in Ireland, which is perceived to be back on track and offering far better value than in the bubble years. The proposed purchase of the Burlington Hotel in Dublin by private equity heavyweight Blackstone is but one small signal of this.

Being part of Cantor will give Dolmen access to institutional buyers that they most probably would not have been able to secure as an independent entity.

It also has the potential to spice up the market here. Davy and Goodbody have traditionally dominated the market here for equities, bonds, debt financings and such like.

Cantor is regarded as an entrepreneurial buisness. It lost 658 of its 960 New York-based employees in the 9/11 terrorist attacks, which would have wiped out most businesses. Slowly but surely it was rebuilt over time and it will be interesting to see what impact its makes in Ireland.

British energy policy blows hot and cold

Britain’s energy and climate change secretary, Ed Davey, and his junior minister, John Hayes, reportedly differ over future energy policies.

Hayes is Euro-sceptic and is well-known for his opposition to the development of more onshore wind farms in Britain.

He signalled as much recently when he said that the country could meet renewable targets with what is already built and a small proportion of what’s in the planning system – “end of story”.

His boss, on other other hand, says that there are “no caps” on onshore wind, which he argues is cheap and will play an important part in the future.

From Ireland’s point of view, those differences don’t matter a whole lot. The Republic and Northern Ireland have a single power market. That market is on track to achieve its target of meeting 40 per cent of all electricity from renewable sources by 2020.

However, some industry figures here were concerned that Hayes’s scepticism about renewables could hit plans for an Irish-British inter-governmental agreement that would allow renewable operators in the Republic to plug directly into the national grid on the island of Britain and sell their electricity there.

That deal is still on track, as responsibility for it has reverted back to Davey’s charge.

Anyone with plans to cash in on the opportunities that this is likely to create can breathe a sigh of relief.

But, in an odd way, it shows the challenge facing the EU as a whole in its plans to integrate its various energy markets. Marie Donnelly, director of energy efficiency and innovation with the EU Commission, told the Irish Institute for European Affairs yesterday that we are a long way from such integration.

Given that there can be sharp policy differences between ministers in the same government, how difficult is it going to be to get multiple administrations across an entire continent to sing from the same hymn sheet?

Bord Gáis bond sale is good news for State

For all the budgetary travails in Europe, it has been another positive week for Ireland in the bond markets.

Buoyed by the strong support for the ESB’s recent bond sale, fellow State utility Bord Gáis Éireann decided to follow suit, raising €500 million in five-year money in the market to refinance existing debt.

Several features marked the BGE issue as worthy of note. First, at 3.625 per cent, the yield on the bonds is far more favourable than the 5.75 per cent Bord Gáis had to offer the last time it entered the market for debt, in 2009 when it borrowed €550 million. That is the money that the latest fundraising will pay down. The lower interest rate will also enhance the group’s balance sheet.

More striking, bond analysts Glas noted that the sale was reported to have attracted interest from 400 separate bidders and received orders of €6.5 billion. Bond sales are always oversubscribed – they are in deep trouble if not. However, a 13 times multiple on the debt available is quite extraordinary. A bond issue that found itself oversubscribed between four and six times would be seen as positive.

Bord Gáis was the fourth group to tap the markets in the past fortnight – following the NTMA, Bank of Ireland and the ESB – and adds strength to the belief that Ireland can re-enter the bond markets on schedule, as predicted recently by German finance minister Wolfgang Schäuble.

But that’s not guaranteed and episodes like the EU’s latest failure to agree – this time on a seven-year budget – could easily see confidence in the State’s potential for short-term recovery slip.

Monday sees the latest chapter in another tale of EU dithering, this time over the ability of Greece to repay its debt, a conflict between the EU, the ECB and the IMF that is holding up payment of the latest tranche of bailout funds to the beleaguered Greeks.

It may have been a good week on the bond markets for the peripherals, with Ireland at their head, but timing remains key – and much of that remains out of our control.

On that basis, it was possibly a little surprising that the NTMA did not capitalise on the favourable view of Ireland to sell more longer-term debt itself.

 Next week

European finance ministers meet on Monday in another attempt to agree terms with the IMF and the ECB for the disbursement of the latest tranche of bailout funds for Greece.

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