Five former Davy executives involved in bond controversy to net €180m from sale

Former chief Brian McKiernan set to reap €70m from sale to Bank of Ireland

Five former top Davy executives, who were involved in a controversial bond trade that led to a Central Bank fine in March, are set to net €180 million from the sale of the firm's assets.

Bank of Ireland confirmed on Thursday that it has agreed to buy Davy's main business, comprising its capital markets and wealth management units, for up to €440 million. A quarter of the amount is being held back for two years.

Davy has also signed up to sell its funds division and a stake in a UK joint venture in two separate transactions that will boost its excess cash level to about €125 million. As these are due to be completed before the Bank of Ireland deal next year, the bank will also acquire the cash pile.

Davy put itself on the market in March as it grappled with the fallout from a €4.1 million Central Bank fine. Davy was found to be in breach of market rules for failing to identify whether a conflict of interest existed as 16 employees, including the five senior executives, bought bonds from a client in 2014 without disclosing that they were the buyers. Davy also kept its own compliance officials in the dark on the trade.


Largest shareholder

Brian McKiernan, Davy’s former chief executive, who quit in March, has told shareholders in a holding company that ultimately owns the business that they stand to share as much as €540 million net proceeds from the asset sales.

As the largest shareholder, with a 13 per cent stake, he is set to receive €70.2 million. Four other former senior figures involved in the 2014 trade – one-time chief executive Tony Garry, former deputy chairman Kyran McLaughlin, erstwhile head of institutional equities David Smith and ex-head of bonds Barry Nangle – are poised to share €108 million for their estimated combined 20 per cent stake.

In addition, Bank of Ireland has agreed to pay €40 million to remaining Davy employees from 2025, subject to the business reaching certain performance targets.

Bank of Ireland plans to transfer up to 80 staff by the end of 2022 to Davy. These will benefit from Davy's bonus programme, which the Department of Finance has allowed the firm to retain, even though variable pay is effectively banned at Bank of Ireland and other bailed-out lenders.

This follows a template set when AIB struck a deal to buy Goodbody Stockbrokers in March.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times