Sat, Jul 3, 2010, 01:00

INSIDE THE WORLD OF BUSINESS:Fexco could be within two weeks of owning Goodbody; Ulster Bank CEO gone; Tysabri price hike

NEXT WEEK:The largest company on the Irish Stock Exchange Iseq index CRH will issue a trading and development strategy update for the first six months of 2010

Fexco could be within two weeks of owning Goodbody

KERRY-BASED FINANCIAL services group Fexco is said to be within 10 days to a fortnight from completing the purchase of Goodbody Stockbrokers from Allied Irish Banks, which is struggling to raise €7.4 billion to fill the capital hole identified by the Financial Regulator at the part-nationalised bank.

Sources close to the sale process have described a deal as imminent. A price of anywhere between €20 million and €35 million has been suggested in terms of what Fexco will have to pay to fulfil its long-held ambition to own a substantial player in Irish stockbroking.

The timing is both good and bad – good in the sense that it is getting an established stockbroking firm at well below the sky-high prices that such firms would have commanded at the peak of the economic boom; bad, in that stockbroking is no longer as lucrative as it once was.

Fexco is flush with cash from the firm’s solid profitability and the €125 million sale of its money transfer business to Western Union earlier this year.

Undoubtedly, the Kerry business will look to cut some of Goodbody’s 260-strong workforce to improve the deal and use its existing strong back-office technology to maximise the return on the Dublin-based broker which has suffered like most in the industry over recent years.

While Irish stockbroking has not relied exclusively on domestic equities, the industry has suffered dramatically from a collapse in value of Irish stocks and the declining property sector where, like most others, it partook in deals.

Stockbrokers have been hit with a double whammy. The turnover of the Irish market has plummeted from €198 million at its peak in 2007 to €53 million last year and fee income has fallen on commissions, halving to 0.1 per cent or even lower on some transactions.

Still, despite the depressed market, Fexco would have an advantage at Goodbody’s over rival Davy where management spent €316 million buying the firm from Bank of Ireland in 2006 with heavy debts that must be repaid.

Ulster Bank CEO gone

The exodus of Irish bank chief executives continues with the departure of Ulster Bank chief executive Cormac McCarthy.

Of the 11 retail banks operating in Ireland – domestic and foreign-controlled – nine have new chief executives. The two survivors are Andrew Healy at National Irish Bank and Fergus Murphy at EBS building society who took over in early 2009 after the crisis hit.

Healy has been running NIB since the bank’s Danish owners Danske bought the lender in 2005.

Among the nine new recruits, only two were external appointments or recruited from outside the parent group – Mike Aynsley at Anglo Irish Bank and Gerry McGinn at Irish Nationwide.

One wonders if the lessons of the crisis have been learned in the absence of a full changing of the guard. AIB, Bank of Ireland and Irish Life Permanent all picked chiefs from within internal ranks.

McCarthy has survived longer than most due, in large part, to his high standing among the executive management team at Ulster Bank’s parent company, Royal Bank of Scotland, where he has held key supervisory roles.

He has been head of RBS European Consumer Finance and RBS Regional Markets, Europe and the Middle East as well as, recently, deputy chief executive of the bank’s British retail business.

At home, McCarthy and Ulster Bank played a leading role in the property boom-and-bust story – at one end helping to fuel the credit bubble with products such as 100 per cent mortgages and, at the other end, funding high-profile and high-risk development projects.

The bank has jointly financed property deals with domestic lenders which have taken severe writedowns on loans as the National Asset Management Agency took a bleak view of the value of the underlying properties.

Undoubtedly this will have forced Ulster Bank to reassess its own development loans and RBS over the capital it has had to inject into its struggling Irish subsidiary.

Tysabri price hike

Bigen’s new chief George Scangos was quick this week to emphasis his determination to drive the performance of Tysabri, the multiple sclerosis blockbuster drug the US company produces in association with Elan.

The Irish biotech group has put that to the test, announcing an 18.7 per cent increase in the price of the drug from this month.

Both companies are hoping that tests currently being developed wll help identify patients at risk of a rare and potentially fatal brain condition, overcoming what they see as one of the main stumbling blocks to building patient numbers.

In the meantime, Elan – which decides the pricing of the drug – cited “multiple factors” behind its decision to sharply increase the price of the drug, including the “business requirements” of both companies.

Quite how they will take to the presence of a 62-year-old microbiologist at the head of their joint venture partner remains to be seen. When questions were raised previously about Elan chief executive Kelly Martin’s lack of a scientific background, Elan was quick to rubbish the notion of allowing a scientist run the business.

And, to add to the challenge, Scangos will also have to contend with activist shareholder Carl Icahn, who eventually saw off his 51-year-old predecessor, Jim Mullen.

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