Vol. 414 No. 2
17 Mr. Rabbitte asked the Minister for Tourism, Transport and Communications if he has now received a proposal from employees of the B & I company for a worker-management buy out of the line; if he will outline his response to the proposals; and if he will make a statement on the matter.
25 Mr. McGinley asked the Minister for Tourism, Transport and Communications if he is in a position to make a decision as to which proposal the Government will sanction in relation to the future ownership of the B & I line; and when a decision will be made in this regard.
I propose to take Questions Nos. 17 and 25, together. I wish to make an important announcement in relation to the future of the B & I line. Before doing so, I would like to remind Deputies of the background to the State's involvement with the company. B & I were acquired from the private sector by the Government in 1965. The Government injected equity into the B & I line in 1971 and 1972, and in each year from 1976 to 1990 for working capital purposes. Pending a decision on the future of the company, it was decided not to inject additional equity in the current year. Instead, the Government have guaranteed short term borrowing of up to £8 million by the company in 1991.
The Exchequer has invested £106 million in the B & I Line since 1965. Of this amount, approximately £100 million has been invested since 1977 and £53 million since 1985. Despite an improved trading result this year, B & I are still making losses after interest charges. The company still require, therefore, substantial Exchequer financial subsidy to meet their ongoing commitments.
SKC Corporate Finance Ltd. were appointed by me last year to examine the future options for B & I with the main objective of determining how soon the company's dependence on Exchequer financial support could be ended. Having assessed the feasibility and financial implications of a number of options, the consultants came out strongly in favour of the sale of B & I as the best option.
The Government's decision to sell their shareholding was strongly influenced by the fact that they do not have the resources for the continued heavy investment in the company which the consultants highlighted and which all parties concerned agree is necessary for the continued survival and development of the company.
Following an extensive competitive tendering process carried out by my financial advisers, SKC Corporate Finance Ltd., a memorandum of agreement on the sale of the entire issued share capital of B & I was signed on behalf of the Minister for Finance and Irish Continental Group on 28 February 1991. A clause in the agreement provided that it would lapse if, for whatever reason, the sale was not completed by 16 August 1991.
Following the signing of the agreement, ICG had a comprehensive due diligence exercise carried out on B & I. This led to further complex and protracted negotiations with my advisers on a range of additional items in respect of which ICG had sought compensation.
ICG also entered into extensive negotiations with the B & I unions with a view to reaching a comprehensive agreement on rationalisation and work practices prior to completion of the sale. However, I regret to say that negotiations with the unions took much longer than was anticipated.
By 16 August 1991 a share purchase agreement had not been concluded and the necessary enabling legislation had not been enacted. Accordingly, the memorandum of agreement with ICG expired on 16 August 1991.
Further detailed discussions took place with ICG after 16 August. While progress was made, the expired memorandum of agreement was not replaced by any new legal agreement.
While discussions were continuing with ICG during September I received representations from the chairman of B & I acting on behalf of independent board directors to the effect that in their view the terms of the proposed sale to ICG did not represent good value. They recommended that, in view of the Government's intention to proceed with the sale of the company, the way should be opened once more to competitive bids. The chairman of the B & I board advised me that, given a decision to sell now at the best price available, their advice was that fair value is whatever is the best price that can be obtained in the market.
At the same time, my advisers became aware that a consortium of B & I management and staff, together with their Danish backers, were anxious to make a revised offer for the company. The management had previously made an unsuccessful bid. The B & I group of unions were not involved with the buy-out on that occasion and did not support the previous offer. However, following representations made to me by the management of B & I and the B & I group of unions, I agreed to allow them to attempt to prepare a proposal for the acquisition of the company.
Both Irish Continental Group and a consortium of B & I management and staff, together with their Danish backers, were invited on 25 October 1991 to submit fully comprehensive offers within a two week deadline ending on 8 November 1991. Following requests for an extension from the management/staff buy-out consortium, the deadline was extended first until 15 November and then for a further week until 22 November 1991.
As a result of the collision involving the m.v. Kilkenny, I agreed to give the MSBO consortium a further extension until 28 November. Offers were finally received on that date from both the consortium and Irish Continental Group. A further period was subsequently allowed for clarification of the offers.
I appointed an assessment committee comprising representatives of my Department, the Department of Finance and SKC Corporate Finance Ltd. to examine the two offers. Following detailed consideration of the offers, the assessment committee made a recommendation to me, which I accepted, that the sale should be concluded with Irish Continental Group subject to final agreement on all issues.
The matter was considered by the Government at their meeting yesterday afternoon. During the Government meeting my Department passed me correspondence they had received at 4.30 p.m. yesterday from the advisors to the MSBO consortium indicating, inter alia, that management and staff had withdrawn from the consortium bid involving Danish interests and wished to have an amended bid submitted on their behalf on terms substantially similar to the consortium bid. In other words, the management and staff were proposing to go ahead without their Danish backers, who were equal partners in the consortium and were the largest financial contributors to the proposal.
The terms of this revised offer were presented as being essentially the same as the original MSBO offer. However, only £2 million of the proposed £5 million purchase price offered could be paid immediately. The balance would be paid on a deferred basis to be agreed. In addition, discussions with suitable partners, including Irish Ferries, would take place after 12 months.
Having considered the overall position in the light of the report of the assessment committee, the Government decided that the sale of B & I to Irish Continental Group should take place subject to final agreement on all issues. In arriving at their decision, the Government noted the view of the assessment committee that the buy-out proposal had represented a welcome initiative in Irish industry, involving an equal partnership between management and staff.
The Government agreed with the committee's conclusion, however, that, in line with standard practice, B & I should be sold at the best price available, that was to Irish Continental Group, unless there were other compelling circumstances for not doing so.
I do not propose to discuss details of the two offers at this time because negotiations on all issues with Irish Continental Group have yet to be finalised. I can say, however, that the ICG bid of £8.5 million purchase is substantially better than the buy-out offer of £5 million with £3 million of that on a deferred basis. Both ICG and the buy-out consortium have sought an Exchequer investment of £35 million to remove the company's debt prior to the sale. Clearly, the sale to Irish Continental Group will result in a substantially lower cost to the Exchequer.
I am satisfied that the sale to Irish Continental Group represents the best prospect for the future of B & I. The company, as indeed were the MSBO consortium, are committed to investing £30 million in B & I over the next five years. It will create a strong shipping entity with substantial synergy benefits, a proven track record and the ability to make the necessary investment in the future of the combined entity.
There will be an opportunity for Deputies to debate this matter fully during the course of the B & I Line Bill, 1991, which has been circulated to Deputies today.
On a point of order, a Cheann Comhairle, the Deputy has given a ten page reply to two questions——
I am sorry, Deputy, that is not a point of order.
——which has been circulated——
Deputy Farrelly, resume your seat forthwith, please——
The reply has been circulated.
Deputy Farrelly, resume your seat, please.
This is a breach of privilege of the House.
Deputy Farrelly, please, time is fast running out for Questions today. I am calling on Deputy Rabbite, who tabled a question.
The ten page reply was circulated to people other than Members.
If the Minister will not give the House the financial details today, I wonder if he will put on the record of the House details of the shareholders involved in Irish Continental Group.
It should have been a statement provided to Members of the House.
Regarding the minimal dilution of revenue involved as between the offer from ICG and the revised management/worker buy-out proposal, is it not the case that 100 additional jobs would be protected in B & I if the management/staff proposal were accepted? Finally, I ask the Minister whether he knows of the anger and resentment he has provoked among both management and workers in B & I because of their conviction that he used them——
That is right.
——to force ICG to get off the fence and give effect to their proposal to purchase B & I——
Questions should be brief, Deputy.
The Minister took 15 minutes to reply.
——and that he abused their confidence and trust in that manner.
He betrayed them.
I did not use them in any way. I have to remind the Deputy that the request——
They were in my office a few minutes ago.
——to re-open tenders to allow the management and staff to make a second offer came from them.
The Minister rushed out this Bill so that he would pre-empt their offer.
Please, Deputy, let us hear the Minister in reply.
The request to re-open competitive bids came from them. Therefore, I could not have been using them to put up the bid.
In relation to jobs, my understanding is that ICG were talking about perhaps a loss of 250 jobs, a large number of them, if not all, voluntary losses. The MSBO talked about a loss of 150 jobs, but could not rule out the possibility of another 100. So, at the end of the day, that was much of a muchness.
Neither can ICG.
I wish to ask the Minister several specific questions.
Brevity must be the keynote.
Will the Minister confirm——
That is not acceptable.
Deputy Farrelly must restrain himself.
——that he was in the Far East when the management buy-out bid was lodged and issued last Friday and that it is not proper or fair consideration for something to be received at, as in this case, 4.30 p.m. and for the Government to have made a decision on it within two or three hours? Would the Minister agree that that was setting up the management? Will the Minister also confirm to the House that, in this deal, he has no commitment or guarantee whatsoever to the continuity of any shipping services at present carried out by the B & I on any corridor; that he has no guarantee——
Please, Deputy Yates, I did ask for brevity.
My final question is: would the Minister confirm that he has no guarantee in relation to any future resale of the B & I to anybody?
This matter has been going on for over 12 months since the Government first accepted the Irish Ferries offer. My absence from the country last week for a few days played no part in the decision finally taken. I was fully au fait with the position hour by hour even in my absence.
With regard to the 4.30 p.m. development yesterday I should say both offers were formally received well in advance of the Government meeting, were gone through by an assessment committee, comprising representatives of the Department of Finance, of my Department and of SKC over a matter of days——
But it changed only yesterday.
At the very last moment a letter arrived announcing that the Danish interests and the management people were no longer in a position to proceed with their offer.
The Minister took that decision within two hours.
In that context, as it were, there was no management buy-out, formal offer because the deadline had passed.
I want to advise the House, as did the Minister in the final paragraph of his reply, that there will be an opportunity for Deputies to debate this matter fully——
A Cheann Comhairle——
Please, Deputy Farrelly, do not interrupt me when I am making a statement to the House. I shall repeat: there will be an opportunity for Deputies to debate this matter fully during the course of the B & I Line Bill, 1991 which has been circulated to Deputies today.
The Minister spent ten minutes giving his reply.
I am calling Deputy Rabbitte for a final supplementary.
May I put it to the Minister that a proposal as between management and staff for the buy-out of the B & I Line, which was concluded and submitted to him only yesterday, could not have received fair consideration by the Cabinet, that in fact the management and workers concerned feel that the Minister betrayed them in using them to precipitate the ICG into the purchase of the B & I; that they feel betrayed, that their trust and confidence was abused; that they are extremely angry that a proposal that was submitted yesterday morning, through no fault of theirs——
That is not true.
——was not given fair consideration either by the Minister or the Government. Surely people who have spent all their lives working in the B & I have some entitlement at least to have their proposals weighed up, measured and decided after consideration by the Government.
Having made a profit of £2.5 million they will be subjected to the dole queues.
The Deputy should have regard to the facts.
Deputy Rabbitte, there is no point in asking a question in that manner. Could Members ask their questions in a less heated fashion when they might get less heated replies? Deputy Rabbitte, do not point your finger at me; I do not point my finger at you. We will finish this in a civilised fashion——
It is a crucial issue for the people who will lose jobs.
I will hear a final supplementary from Deputies Byrne, Ryan, Yates and Stafford and the Minister will now reply to Deputy Rabbitte.
I offered earlier.
I should say to Deputy Rabbitte that it is almost 12 months since I publicly announced the Government decision to sell the B & I Line to Irish Ferries. In the intervening period, at the request of the workers themselves, I reopened the tendering process to allow them make an offer. They made an offer over a five-week period, received finally on 28 November, which was considered by Cabinet on 4 December. The Cabinet got to it five or six days after the final submission had been received from both sides. It was at the very last moment only, long after the deadline of 28 November had been reached, that a note arrived to say that the Danish interests, who form almost half the bid from the workers' side, were no longer available to be involved.
I am surprised they considered financial backing from another source.
In that circumstance we could have said the only logical conclusion was to deal with the only remaining tender. Those are the facts and I have put them to the Deputy in an honest manner.
A hot potato the Minister got rid of as soon as he could.
Those Deputies I nominated will be given an opportunity of asking questions. They need not all rise simultaneously. I am calling on Deputy Eric Byrne.
We are dealing with facts——
We are dealing with questions, Deputy.
Would the Minister agree that he goes about his privatisation policy with about as much grace as a bull performing on a Bolshoi stage; that he has been so dedicated to a senseless policy of privatisation, he has even embarrassed the Fine Gael group who similarly privatised and got rid of Irish Shipping Limited, throwing the workers on to the dole queues? Would the Minister tell me what is his message to the workers of B & I who swung that company around into making operating profits of £2.5 million last year? What is his Christmas message to those workers today?
Like the Deputy I greatly appreciate, and have said so publicly many times, the Trojan efforts of the management and staff in that company. They have put up with a lot over many years and deserve some kind of future——
What is the Minister offering them?
The process through which we have gone over the past 12 months, in my view, offers them the best possible option of some kind of future in the company. Incidentally, the Deputy asked what was my Christmas message to the staff. I might ask the Deputy: what is his message to taxpayers who put £100 million into the company?
I am calling Deputy Stafford. Would Deputy Eric Byrne please resume his seat?
No doubt the Minister is fully aware of the serious position in relation to Dublin Port, the B & I Line being such important shippers in and out of that port. Can he assure the House that there will be no curtailment in their services between Dublin Port and others as a result of the circumstances now prevailing?
The Minister has lost control.
The company will make a £30 million investment in a new, combined line. I look forward to, and will work with, the new operation, to build the present B & I and Irish Ferries into an even stronger single, Irish-owned group. That is what I am working towards.
The Minister referred to the Danish backers of the management/staff buy-out. Would the Minister confirm that, when the Danish backers — BLEEBERG — visited Ireland in early October, he prevented that company from gaining access to the B & I? Would he confirm that that company wrote to him complaining that they had been prevented from gaining access and that that shows that in fact he lacked——
Deputy Gilmore, this is Question Time. You are making statements, giving information to the House——
I am asking the Minister for confirmation——
We have gone way beyond the order of the House in respect of questions. I must now ask the Deputy to pose a short question, the Minister to give a short reply and, similarly, a short question from Deputies Seán Ryan and Yates. We must then terminate questions. We must live in accordance with the orders of the House.
Can the Minister square his reluctance to give the Danish backers access to the B & I with his professed belief in the management/staff buy-out option about which he spoke earlier?
I will have to look into the detail of what the Deputy suggests, but, in preparing the bid which came in finally on 28 November, I assumed that the partners of the workers and management of the B & I had full access to all information——
But the Minister refused them access.
The Minister had his mind made up.
Presumably they got that information before making their bid on 28 November.
The Minister had his mind made up.
That is not fair and the Deputy knows it.
The Minister has a philosophical attitude to——
I might remind Deputy Byrne that we are not in a kindergarten; this is a seat of Parliament. I would ask the Deputy to respect the orders made by Members and not reduce Parliament to a farce.
Would the Minister say why the final revised offer of management and staff was not given sufficient consideration by himself and the Government? Furthermore, would the Minister not accept — given the goodwill of staff and management — that his decision amounts to a sell-out of those workers, a knife in their backs, particularly in view of their tolerance in recent months?
I must repeat, I reopened the process in order to facilitate workers and management to make a second bid, they having made a previous one. But the second bid effectively failed because of the inability of the Danish backers and themselves to come to a final agreement. The third bid, with phased payments and such things, was — as I have already indicated — substantially worse than the bid from Irish Ferries. I must have some regard to the tendering process and a fair assessment by the two Departments and outside advisers. We have dealt with this matter fairly and openly, having regard to the taxpayers and the workers. The B & I workers can have a better, more professionally organised future than would have been open to them if we had taken some other route with a less certain future.
I hope the Minister will be quite explicit in confirming that he has got no commitment whatsoever in this deal with Irish Ferries as regards the continuity of any services or the keeping of the company under the Irish flag in any future resale. Is the Minister aware that in the aborted discussions between the unions and Irish Ferries, one of the major problems was the history of a huge inter-union dispute within B & I and that this union is very prominent within Irish Ferries? This will be a recipe for chaos. Will the Minister confirm that when the Dutch group backed out, Allied Irish Corporate Finance filled their place and the deal stood up because of their continuing involvement in it?
I am pleased to note that the position of the Fine Gael Party is that we should have taken a decision other that the one we took, considering the facts I have put before the House.
I did not say that.
We want the Minister's position. Do not pass the buck.
I am glad the Deputy is on the record.
I will be happy to answer any questions. Let us have some answers from the Minister.
I share the Deputy's concern about inter-union disputes and I hope there will be no difficulties in that area in the future so that we can get on with running a fresh shipping service. With regard to services, a £30 million investment has been committed to the development of the line and that obviously means an expansion of services rather than any curtailment.
Is the Minister guaranteeing continuity?
I cannot guarantee.
Freight accounts for 50 per cent of revenue.
In the commercial world you cannot guarantee things like that.
I kept B & I open. The Deputy's party closed Irish Shipping.
Take your medicine.
There will be 900 B & I workers at the Minister's door by the weekend.
The Chair will not reduce itself to the level of the contributions. I wish you could hear yourselves, then nobody would have to say anything.
I thank the Chair for permitting that extra time.
It is not to be taken as a precedent; it was an exception.
