Current Account »

• Corporate memory at Cadbury is short and selective

  November 16, 2009 @ 11:17 am | by John Collins

  As Fiona Walsh wrote in her London Briefing column last week, after an eight week phoney war the battle between Kraft and Cadbury over the American conglomerate’s £10 billion (€ billion) hostile takeover bid for the British chocolate maker, now becomes a formal three month battle of wits.

  Following the move into the formal takeover period Cadbury chairman Roger Carr wasted no time in dismissing the Kraft bid as derisory and labelling its American suitor as a “low growth conglomerate”. There is of course a slight undertone of snobbery here. On its corporate website 185-year old Cadbury trumpets its Quaker roots, its commitment to fair-trade and the wholesome milk that goes into its flagship chocolate product. Clearly the approaches from the maker of Capri Sun, Handi Snacks and Kraft Easy Mac Cups (don’t ask) are unwanted.

  Watching one of those Saturday night top 50 shows on Channel 4 I was reminded just how short the corporate memory at Cadbury must be. Anyone remember Cadbury’s Smash from the 70s?

  

  Cadbury and Kraft may have more in common than one side wants to admit. This is going to be a long and interesting battle.

• Creating one bad bank and adding the bad debts of the others

  January 14, 2009 @ 10:01 am | by Simon Carswell

  The London-based Daily Telegraph reported this morning that the UK Treasury has asked Credit Suisse to assess the possibility of setting up a “bad bank” as a means of restoring a better flow of credit into the economy. This happened following the collapse of the banking system in Sweden in the early 1990s where bad property loans were purchased from some of the country’s more troubled banks. The UK government could ring-fence bad debts and underwrite them with a state guarantee.

  Anna Lalor, analyst at Goodbody Stockbrokers, says in a research note this morning that a similar plan by the Irish Government would “depend on its willingness for taxpayers to take on the risk of such loans (on the assumption that they were transferred at fair prices – whatever that may be) and its capacity (to raise sovereign debt) to support any additional equity issuance that may be required as a result of taking credit losses up front.”

  It would certainly be a clever idea corralling all the bad debts, particularly high-risk, speculative loans to the property market, into one bank so the Government could solve one problem instead of six. Bank of Ireland’s former chief executive Mike Soden has suggested this as an idea to this newspaper in recent weeks. Such a plan would deal with a significant blackspot on the balance sheets of the Irish banks. However, the taxpayer should exact a hefty premium for shouldering the not-insubstantial bad debts into a single Irish bank.

• Elan’s trouble with dates

  January 13, 2009 @ 8:12 pm | by Dominic Coyle

  Elan president Carlos Paya entered the JP Morgan Healthcare Conference hoping to put behind him the controversy over statements attributed to him over a possible extension to the duration of Phase III trials for the company’s Alzheimer’s drug bapineuzimab  currently slated to last 18 months.  Unfortunately, as he moved to clarify -referring to recent confusion – he again alluded to 24 months before hastily correcting himself.

• Will Lenihan seek banker resignations in return for capital?

  December 15, 2008 @ 11:04 am | by Simon Carswell

  Minister for Finance Brian Lenihan said in an interview with RTE yesterday evening that there would be some “tough” decisions ahead for the banks in response to a question about management changes at the institutions. He’s clearly hinting that some of the senior management teams at the banks may not be around after the State injects capital through this recapitalisation programme of up to €10 billion announced yesterday evening. It’s no surprise therefore that some of the banks have been resisting private equity investments and even any potential capital raising from their own shareholders over recent months.

  The prospect of shutting down lending in a bid to bolster capital is not finding favour within Government at a time when credit rationing is the last thing that most small and medium-sized businesses are struggling to keep cash flowing.

  There is much at stake at present. The State is setting up a mechanism where €10 billion should get the banks up to capital ratios of the 8.5 per cent which will appease the market as these levels have become the norm since the UK bank capitalisation. However, the State is setting conditions on its investment “in order to safeguard fully the interests of the taxpayer.” (more…)

• Is French bank BNP Paribas eyeing an Irish investment?

  @ 10:35 am | by Simon Carswell

  Weekend press reports suggest that BNP Paribas is being sounded out for a possible investment in one of the guaranteed financial institutions, with one newspaper reporting that EBS building society was in its sights.

  We understand that local Dublin management at Postbank, the Irish savings bank which is jointly by An Post and French BNP Paribas, made contact with EBS in recent days to ask tentatively about a possible alliance with the building society, though EBS appears to be far more focused on a potential merger with Irish Life & Permanent and both parties are still in talks.

  It is not clear whether BNP Paribas is itself interested in an Irish investment or if the local managers at Postbank are just seeing what potential mergers are out there. BNP Paribas would appear to have plenty on its plate taking control of the Belgian-Dutch financial services group, Fortis, without seeing what else is out there in terms of other investments.

• Consolidation – the banking ballroom of romance

  December 4, 2008 @ 11:45 am | by Simon Carswell

  As various US private equity firms and Middle Eastern sovereign wealth funds circle the Irish banks (and Bank of Ireland and Irish Life & Permanent in particular) and a home-ground solution to recapitalisation has emerged in the form of a rival group of local institutional investment funds, Anglo Irish Bank has said mergers are not for it.

  David Drumm, chief executive of the bank, said at Anglo’s full-year results yesterday that “consolidation was not on our agenda”. Asked if he saw the six Irish-owned banks and building societies being merged into two big banks, Drumm said he would “struggle to see” a need or rationale for consolidation or a two-bank Irish system. Drumm sent an email around to staff on November 21st about this topic when there was much debate around consolidation in the banking sector. Here’s what he said: (more…)

• Bank of Ireland continues talks with Mallabraca group

  November 24, 2008 @ 9:46 am | by Simon Carswell

  Bank of Ireland held discussions with Irish representatives of the Mallabraca consortium of US private equity firms last Friday as the bank confirmed that it had received “unsolicited approaches from a number of parties wishing to make an investment in the group”. We are told that the bank and Mallabraca are continuing to hold talks this week, described not as formal due diligence but a type of diligence where the bank’s management would meet representatives of the consortium. It sounds like both parties are weighing each other up.

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• How are things in Maulabracka, sorry, Mallabraca?

  November 22, 2008 @ 10:18 am | by Simon Carswell

  There have been fascinating developments in the Irish banking sector this past week. The emergence of this grouping of private equity firms, led by Nick Corcoran and Nigel McDermott of Cardinal Asset Management and Bryan Turley of Dublin firm Sorrento Asset Management, with advisory help from New York-based investment bank Sandler O’Neill who are also investing in the consortium, is intriguing. Even more interesting is the consortium’s desire to buy into Bank of Ireland and possibly a merged group comprising that bank and Irish Life & Permanent.

  Corcoran and McDermott (who have both worked with IIU, financer Dermot Desmond’s investment company), have brought in private equity giants JC Flowers (which has a predilection for buying into troubled banks) and The Carlyle Group as well as some two sovereign wealth funds from the Middle East (if they are needed for any major stake-buying in the banks). Curiously, they have chosen to the name the consortium after Mallabraca, a townland near Dunmanway in Co Cork and the birthplace of one Sam Maguire, whose name is emblazoned on the GAA All Ireland football trophy.

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• Radical shake-up of the Irish banking sector on the way

  November 21, 2008 @ 9:14 am | by Simon Carswell

  Minister for Finance Brian Lenihan has signalled to the State’s six guaranteed banks and building societies what his officials have been assessing privately since the summer – a radical re-shaping of the Irish banking market with mergers. Mr Lenihan spoke of “structural” changes to the banking sector and a major reform of the market during his discussions with the chief executives and chairmen of the four banks and two building societies at Farmleigh in the Phoenix Park yesterday.

  The feeling among participants at these meetings, though nobody is commenting, is believed to be that the Government will re-mould the banking sector into two enlarged banks based on the big two players – AIB and Bank of Ireland. This would mean six institutions being hammered into two – in tandem with private equity and possibly State co-investments.

  This “Farmleigh Framework” is all part of the three-pronged Government’s strategy to fix and strengthen the Irish banking sector. Part one involved the guarantee. Parts two and three are consolidation and recapitalisation, though not necessarily in that order.

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• Dealmakers sniff around the banks

  November 18, 2008 @ 1:24 pm | by Simon Carswell

  Dublin has been awash with rumours in recent weeks of private equity firms and cash-rich US and Middle Eastern investors expressing an interest in taking stakes in the Irish banks. These parties would need to work closely with the Government and know the mindset of Minister for Finance Brian Lenihan before seriously progressing towards a deal, given the €440 billion bank guarantee that is in place.

  One Irish bank was tentatively approached in recent days to see if they would be interested in taking a share of between €4 billion and €5 billion that could become available from the Middle East. The bank said no.

  It would appear that there are a number of dealmakers sniffing around the Irish banking market, looking for distressed assets to make money for flush investors. The Irish banks fit the bill. US Treasury Secretary’s scrapping of the purchase of troubled assets from the US banks, which could have created a pool of juicy, discounted assets for these investors, means that they are now turning their focus overseas, so Ireland could well become an attractive target.

  AIB has said it can raise capital on its own and the posturing from the bank indicates that its 24 per cent stake in US bank M&T is all but on the block. The stake would raise about €1 billion in fresh capital. However, in these distressed times, it could be a while before it sells.