The Central Bank has given approval in principal to the British financial group KNH Options for the takeover of the troubled stockbroker MMI.
"Legal documentation is being finalised for approval and we expect to reopen for business very shortly," MMI said in a statement released yesterday, although it did not mention the name of the proposed investor.
The announcement will be welcome news for those clients whose investments have been frozen. A number of clients who hold shares in nominee accounts with MMI are believed to be unable to gain access to the funds tied up in their share portfolios.
It is likely that KNH and another private investor will be taking over only MMI Stockbrokers and not MMI's asset management subsidiary.
KNH is an associate of the Dutch bank Mees Pierson which has a 20 per cent stake in the London broking company. The firm, which operates as a market-maker in London, is thought to be owed substantial amounts of money by MMI and that this debt was the main reason behind its decision to bail out the Dublin-based broker. The takeover is expected to only involve the acquisition of MMI's assets and liabilities and no money will be paid to MMI's founders, Mr Oisin Fanning, Mr Paul Boucher and Mr John Curran. Although MMI's managing director Mr Tim Murphy - who led the negotiations to save the firm - is expected to stay with the company, the takeover could lead to other management changes at the firm.
Meanwhile, the Irish Stock Exchange is believed to have examined a number of transactions carried out by MMI, amongst which are deals involving Dana Petroleum.
Heavy trading in Dana shares was the main cause of the problems at the firm which first came to light in September when the Central Bank ordered the stockbroker to stop trading except where it gave explicit permission.
The company ran into cashflow difficulties because of the rollover arrangements it had with a number of clients which allowed them to postpone paying for Dana shares they had ordered the broker to buy on their behalf.
This left MMI holding a large number of shares which had been bought for more than 20p but later fell to around 8p. Many of the clients then refused to pay their bills and when a number of London market-makers withdrew their support for the roll-over arrangement, MMI was left holding Dana shares worth only a fraction of what was owed the company by its clients, triggering a cash crisis.
The Central Bank originally gave the firm a few days to get its financial affairs in order - either by reclaiming the money owed to it by clients or by finding an investor to inject the capital - but it later extended the deadlines as the due diligence process proved prolonged.
As well as finding an investor, MMI has taken legal action in pursuit of its debts although it is not yet clear how much of them have been recovered.
