ALLIED IRISH Banks has agreed to sell Goodbody Stockbrokers, the State’s second largest stockbroking firm, to Kerry-based financial services group Fexco Holdings for about €24 million.
The bank said the sale would not result in a material capital gain in its efforts to raise €7.4 billion by the end of the year to meet the Financial Regulator’s new rules.
The transaction is conditional on approval from the regulator, which will take several months.
AIB said the price paid would be subject to “a net asset adjustment for the period up to completion”.
“If the group is sold for cash within the three-year period following completion for a price in excess of that paid by Fexco, or if certain assets of the group are realised for cash within a similar period, additional consideration, subject to a cap, may be payable,” the bank said in a statement.
The stockbroking firm will continue to be led by managing director Roy Barrett, although Fexco is expected to seek about 60 redundancies among the stockbroker’s 270-strong workforce.
Management and staff will take about 25 per cent of the business, with the potential to grow this share to 49 per cent through a profit-share scheme if certain targets agreed with Fexco are met.
The bulk of this will be taken by senior executives Mr Barrett, Brian O’Kelly, Steve Donovan, Eamonn Glancy and Vernon Rushe, though the staff shareholding will eventually extend to 25 key executives at the firm.
The Kerry firm intends to merge its existing stockbroking business, which employs 15 staff in Dublin and Cork, with Goodbody.
The State’s longest-established stockbroker, Goodbody can trace its history back to 1877. The broker has a strong institutional equity, private client and corporate finance divisions, although it lags rival firm Davy, the State’s largest stockbroker.
Fexco, which was founded by businessman Brian McCarthy in 1981 and is based in Killorglin, provides business, merchant, consumer and international services.
The company has almost 1,400 staff in Ireland, Britain, Germany, the US, Australia, New Zealand, Dubai, Shanghai and Hong Kong.
Fexco has a strong cash position, having sold its money transfer business to Western Union for €123 million in February 2009.
A minnow in stockbroking, Fexco’s purchase of Goodbody transforms its position in the industry, albeit at a time when the value of stock trading has plummeted dramatically.
The acquisition is said to be “transformational” for Fexco by a source close to the Kerry firm.
At the height of the market, rival Davy was purchased by management in a buyout from Bank of Ireland for €316 million – almost 13 times the value of the Goodbody’s provisional price – reflecting how sharply the value of stockbroking firms has declined since then.
Goodbody reported into AIB through the investment banking unit of its capital markets division, which was led until last year by the bank’s managing director Colm Doherty, but the bank does not break out the broker’s own results.
AIB has raised about €2.5 billion of the bank’s €7.4 billion capital target through the sale of a 70 per cent stake in Poland’s Bank Zachodni WBK.
The bank is also selling a 22.5 per cent stake in US regional bank MT and the UK division, including First Trust Bank in Northern Ireland. The bank plans to raise up to €3 billion from the sale of new shares to investors and the Government, the mix of which will determine whether the bank manages to stay out of majority State control.
