The statement from the Minister for Finance is here.
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There goes the green jersey. Whatever about the price, this is bad strategic move. We have just relieved ourselves of 37BN of the tax relieved savings of the better off Irish. Price 1.3BN less the continued tax expenditures into the future.
Is there a cost-benefit analysis?
Or is it simply the “right call”?
Embedded value was EUR 1.5 bn at end of 2003 . No value created since - they would have lost a good bit with the crash. 1.2 bn is probably a fair enough price after 10 lost years.
The company was privatised in 1991 but poor old Irish Life never really knew what to do- there were various stabs at branching out of the dependence on Ireland but they were all sold off and then came the marriage with Irish Permanent where they tore the banking ar$e out of it.
I wonder how many of the senior heads will be defenestrated.
Ugliest Danish Banks Find No Buyers in Toxic Asset Trap
”’It was Rohde’s financial model that identified the noxious cocktail of bad assets lurking on the balance sheet of Amagerbanken A/S well before its 2011 failure. The event triggered Europe’s first senior bondholder losses in a state- backed resolution, and Rohde says more bail-ins can’t be ruled out. Legislation designed to spur mergers and avoid creditor losses will probably fall short as potential buyers balk at the prospect of absorbing toxic debt, he said.
Great West Life is a well run company that owns Canada Life (Ireland) which started up in Ireland in 1903. They paid what the Irish gov’t paid for Irish Life last year, that amounts to a major PR win for the gov’t.
This is about the best outcome in the circumstances.
The Minister is making a very big play of the fact that he got his money back. Makes it look like he was a shrewd cookie when he bought it. What is being glossed over is that the Minister bought Irish Life off himself. He set the price. This was not a purchase in the market. Good that he got his money back, for sure. Did he pay himself enough in the first place?
This may be good news for the state but for original shareholders in IL&P its a total wipe out. These includes large institutional shareholders, possibly including Irish life pension funds, who for some reason voted to support the ministers original scheme to re capitalise Permanent using Irish Life. One would have thought that liquidating Permanent and keeping Irish Life, or a variation of same, would have been in their interest
I have not seen any reports of the results of recent court cases by shareholders led by Piotr Skoczylas of scotchstone-capital against the Minister and the Directors of IL&P. Would be interested to know what happened.
“The Finance Minister’s prudent decision to seek an extension to the current
guarantee scheme is a positive interim development, however, a ‘permanent’
solution for IL&P’s banking arm is potentially more elusive than previously
envisioned. We reiterate our Hold recommendation and €3 target price.”
CS Sept 2010
“Publication of regulatory capital review a positive: On Friday afternoon
(10 September), the Irish regulator published the results of its Prudential
Capital Assessment Review (PCAR) for IPM. The main conclusion is that
IPM is not required to raise any additional capital in order to meet the base
case of 8% core Tier 1 (of which 7% must be common equity), but does
need to raise an additional €145mn of Core Tier 1 capital to meet the ‘stress
case’ scenario. More importantly, IPM confirmed that in the event of a
restructuring of the bank/insurance operations as part of its bid for EBS, the
group would require c€925m of incremental capital compared to the
c€1080m we had previously estimated – this would imply a smaller overall
rights issue of c€600-650m rather than our previously expected €750m. As a
result, we raise our 12-month price target to €3.3 a share.
One catalyst down: This review should be a positive for IPM as it provides
clarity on the company’s capital position, and has lowered the expected size
of any capital raising. The next potential catalysts remain 1) confirmation that
the EU accepts IPM’s viability plan and 2) the success of the current bid for
the smaller EBS building society.
Intrinsic value well above the current share-price: Even assuming a
capital raising in the region of €650m we see significant upside potential;
Fair value for insurance operations is at least €1.8bn (1x EV) compared with
a pro-forma market cap of c€1.1bn – giving at least 67% upside. With the
bank recapitalised and moving back towards profitability in 2013
(management target a 10% RoE for the bank), some value should attach to
the bank, with upside rising to 100% if this is valued at 40% of tangible book.”
Congratulations to the multi-million dollar salaried Allen Loney of GreatWest life in achieving the greatest deal of all times. The price paid ,will within a few years represent one years profit of Irish life.
The mountie always gets his man. Hats off to the all concerned.