THE GOVERNMENT has became the majority owner of the EBS after injecting €100 million into the building society and committing itself to providing a possible further €775 million after the 75-year-old institution failed to secure private investment.
Members of the society – its owners – heard the news as they gathered in Dublin for its annual general meeting yesterday.
EBS chairman Philip Williamson, told them the meeting would not proceed as planned because the Minister for Finance now in effect controlled the society.
The Government’s move came after the society failed to attract private investors. The State now seems set to invest up to €875 million in total over the next 10 years.
The EBS requires the funds to bring capital reserves up to the Financial Regulator’s required levels.
In March, the Government undertook to inject €100 million into the EBS through issuing Special Investment Shares. The Minister for Finance said if private capital could not be sourced for the remaining €775 million, the State would issue a promissory note to cover the remaining capital requirement.
The EBS has been negotiating with an investment consortium led by Cardinal Asset Management and including US private equity firm JC Flowers. While EBS chief executive Fergus Murphy said yesterday that these talks were still ongoing, a deal has not yet been reached.
As a result the Government will begin issuing the required capital through a promissory note, a process that will entail the money being paid out in tranches of €78 million over the next 10 years.
Mr Murphy said negotiations with Cardinal were at an “embryonic” stage and would intensify next month but he stressed that a deal with Cardinal was only “an option”.
Mr Murphy told members yesterday that the possible involvement of a private investor would result in a new “corporate form” for the building society. While the institution would remain as a mutual in terms of ethos, it could become a private company, he said.
In the event of the conversion of the EBS to a company, the Government’s €100 million will be converted into fully paid ordinary shares of that company. Shareholders were also told that the Government would have a right to 100 per cent of all surplus proceeds should they arise in the event of a sale.
Mr Murphy said yesterday it could take six months to “know for sure” the likely corporate form, investor base or ownership profile of the EBS.
He said the mooted “third force”, which would have seen a merger of Irish Nationwide and EBS, was now unlikely. “The EU is not positive about two entities who have received government state aid merging with each other,” he said.
The EBS will submit its restructuring plan to the EU next week.
The Government’s appropriation of 51 per cent ownership of the EBS meant that voting on three resolutions, which had been scheduled to take place at yesterday’s agm, did not take place. Members criticised the timing of the transfer of the €100 million Special Investment Shares which gives the Minister for Finance 51 per cent ownership and full control over all resolutions.
One member, Emer O’Dowd, asked why the transfer had not taken place after the agm so that members could have voted on the appointment of the board members. “I feel that I’ve had my time wasted,” she said.
Other shareholders expressed concern about the society’s future. “I think we’ve lost our mutual position,” one member said.
