AIB in exclusive talks to buy back Goodbody Stockbrokers

AIB is in exclusive talks to buy back Goodbody Stockbrokers for a multiple of the €24 million it was forced to sell the firm for a decade ago under a restructuring tied to its taxpayer bailout, The Irish Times has established.

Top management at the brokerage and wealth management firm and Kerry-based financial services group Fexco, which acquired control of Goodbody from AIB in early 2011, picked the bank as preferred bidder for the business this week, according to sources.

The period of exclusivity in which an agreement must be reached runs until the end of December. Goodbody’s larger rival Davy is also said to be interested in a tie-up, in the event the current talks fail.

AIB's chief executive, Colin Hunt, served as chief economist at Goodbody between 1998 and 2004.

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Spokesmen for AIB, Goodbody, Fexco and Davy declined to comment. Fexco owns 51 per cent of Goodbody and management and senior staff own the remainder.

Goodbody has seen two planned €150 million-plus takeover deals with separate Chinese buyers collapse in the past 22 months. The latest, with Bank of China, fell through in July as regulators in Beijing delayed signing off on the transaction.

The price of those collapsed deals also covered the €45 million that Goodbody received in cash in 2018 when the Irish Stock Exchange, in which it had a 27 per cent stake, was taken over by pan-European exchange operator Euronext.

While sources declined to be drawn on the value of the current deal under negotiation, industry observers said it is likely to be a significant discount to what the Chinese suitors were willing to pay.

Potential stumbling block

A potential major stumbling block standing in the way of a deal with AIB is the fact that the 71 per cent State-owned bank is not allowed to pay bonuses. Variable pay is a big part of remuneration in stockbroking and wealth management businesses; it is used to attract and retain staff but also rein in costs during bad years in a highly cyclical industry.

AIB, which received a €20.8 billion bailout during the last financial crisis, was required under a relationship agreement with the Department of Finance to secure ministerial approval for deals of more than €100 million before it returned to the main Dublin and London stock markets in 2017. It is now only obliged to consult the Minister for Finance.

AIB had to sell a host of assets, including Goodbody Stockbrokers, its former Polish banking unit Bank Zachodni and a minority stake in US lender M&T Bank Corporation, under an EU restructuring plan tied to its government bailout during the crisis. The sales were already completed by the time Brussels approved the final plan in 2014.

While Goodbody, led by long-standing managing director Roy Barrett, had a large degree of autonomy under its previous ownership by AIB, it is understood the bank has plans to integrate it more into the AIB group should a deal go through.