FAILED BID:THE PROPOSED sale of building society EBS to the Cardinal private equity consortium collapsed after the Government said its bid was "not sufficiently commercially attractive" to the State.
The sale process was ended by the National Treasury Management Agency, which manages the Government’s interests in the banking sector, after 15 months of negotiations between the parties.
The decision was taken by Minister for Finance Michael Noonan.
The Cardinal consortium expressed its “extreme disappointment” at the Minister’s decision.
Cardinal, which is backed by New York-based billionaire Wilbur Ross and US buyout firm Carlyle, had been selected as the preferred bidder ahead of Irish Life and Permanent last month.
Cardinal’s negotiations with the NTMA were led by Nigel McDermott and Nick Corcoran of Dublin-based Cardinal Capital Group.
The consortium said that it had offered to invest more than €600 million in EBS and was committed to “an extensive and expertly constructed multi-billion euro funding and restructuring programme” for the funding of the building society.
The group said it had shown commitment and goodwill to Ireland and the troubled banking sector during the sale process.
It had offered “much need [sic] capital and expertise to the State in a manner which would have minimised the already significant burden on the Irish taxpayer and which would have aligned the interest of the State with the consortium,” the group said.
The investors in the group felt that the State was not in a position to conclude a deal with international investors because of the programme with EU-IMF-ECB troika.
In addition to the €600 million investment, Cardinal offered to cover up to about €450 million of further losses at EBS and to share any additional losses beyond that, with the State taking 70 per cent.
The Government had also been offered 10 per cent warrants in EBS if the building society reached certain targets, should Cardinal make any gains from the lender.
The board of EBS met last night to discuss the collapse of the Cardinal offer and the Central Bank’s stress tests, the results of which will be announced this afternoon.
It is understood that the NTMA had concerns about the level of the commercial return to the State promised by the consortium, based on the Government’s investment.
There were also concerns about the risk posed to the State by unexpected losses under the terms of Cardinal’s investment proposal.
The NTMA also had reservations about the consortium’s proposals around the funding of the building society, despite the fact that Cardinal presented a detailed funding plan for the building society to the Central Bank at a meeting over two weeks ago.
The consortium was notified unexpectedly about the termination of the sale process in a letter from NTMA chief executive John Corrigan yesterday at lunchtime.
The letter left open the possibility of other transactions, saying the NTMA looked forward to exploring commercial transactions with members of the group. The State is not obliged to cover any expenses incurred by Cardinal during the sale process.
