The board of First National Building Society is expected to recommend to its members before the end of the year that the mutual society be converted into a company and floated on the stock market. An announcement could be made as early as September of plans for conversion and flotation.
It is understood that the board has opted for this route, though no formal decision on conversion and flotation has been taken yet. But any change in corporate structure would require the approval of the society's members. A special meeting of members is unlikely to be held before January 1998. Conversion and flotation, if approved, would then take place in March/April 1998 at the earliest. First National's managing director, Mr John Smyth, said yesterday: "It is inappropriate to comment on speculation regarding our future strategic direction. We have always stated that conversion and flotation was a serious option for First National and any recommendation to do so would have to be conveyed to our members for consideration at a special general meeting." While a formal board decision has not yet been taken, the directors are understood to be in favour of a change in corporate structure as the best option for the future development of the building society. A management team at the society has been working for some time to examine how the process should proceed and to propose a timetable for the complex changeover which involves members' meetings and regulatory and court approvals.
It is understood that the preparation of much of the documentation required for a flotation is well underway and that a preliminary assessment of how shares and cash payments should be allocated to members and mortgage holders has been carried out. Finding the best corporate structure for the society has been under examination for some time and the issue has been considered by the board at a number of its monthly meetings. In April, the chairman, Prof Michael MacCormac, said the board was "mindful that the group may ultimately be best served by a change in corporate structure".
About a year ago London-based ANB Amro Hoare Govett was appointed to advise on the options to secure the best long term future for the society. At that time the society said that these options included conversion and flotation. Other options included merging with another mutual operation or retaining its existing status.
Mr Smyth confirmed a report in the Sunday Tribune that the society is in discussions with a number of stockbrokers about a possible flotation. First National would have to appoint a lead brokers and other brokers to move ahead with its flotation plans. Brokers have been given preliminary briefings on the society's proposals.
One market source said yesterday: "They would not be doing all this work if they were fundamentally opposed to a flotation." A formal board decision to ask members to approve a flotation could now be taken at the September board meeting. It could be announced with the society's half year results, due about then. If conversion and flotation is approved, about 200,000 society members would qualify for windfall payments.
In a recent examination of the Irish mortgage market, Davy Stockbrokers placed a market value of £309 million to £384 million on First National.
