At the press conference following presentation of the 1993 budget, I said it was the Government's intention to proceed with the disposal of certain State assets, including its residual shareholding of 30.4 per cent in Greencore Plc.
Before plans had been completed to conduct the sale of the Greencore shares by way of an institutional placing, a proposal was received from Archer Daniels Midland to acquire the shares. A number of Irish food companies also expressed interest in acquiring the Government stake.
The Government decided to afford time to all interested parties to put forward proposals and I announced on 2 March that such proposals should reach my Department by 24 March.
I said that the criteria on which decisions would be based would include price and compatibility and the long term strategic development of Greencore as a major Irish food company which could consolidate and expand employment in the Irish economy. I retained Davy Stockbrokers to advise me in the matter.
On 5 April I advised the Government of the proposals which had been received by my Department by 24 March. The Government authorised me on 6 April to enter into immediate negotiations with Archer Daniels Midland Inc. for the sale of up to 25 million of the 25.4 million shares in Greencore plc. currently held by me for the highest achieveable price, and to dispose of the balance of the shareholding by way of an appropriate market placing. It also authorised me, in the event of the negotiations with Archer Daniels Midland not resulting in a selling price acceptable to me, to proceed with disposal of the shares by way of an institutional placing.
The articles of association of Greencore plc. set an upper limit of 15 per cent on the shareholding which any one person may hold in the company. The acquisition by Archer Daniels Midland of 25 million shares would have involved a holding in excess of 15 per cent. The Government therefore decided that the Minister for Agriculture, Food and Forestry should approve an amendment to the Greencore articles of association to increase the 15 per cent limit to 30 per cent. In the event this amendment was not made since the original purpose of the amendment had gone because Archer Daniels Midland decided not to proceed with the acquisition of a shareholding in Greencore.
I announced early on the morning of Friday last, 30 April, that the discussions with Archer Daniels Midland had terminated at the wish of that company and that I understood that its decision not to continue further with the discussions was due to their long duration and public nature. I announced that, as authorised by the Government, I was proceeding with an institutional placing of my holding in Greencore. Davy Stockbrokers acted as my agents in arranging that placing. Davy Stockbrokers at that stage informed me that they proposed to enter into an arrangement with S.G. Warburg in London under which Warburgs would be prepared to take any balance of the 25.4 million shares to be placed which Davys had not placed with other holders, subject to a maximum Warburg uptake of 10 million shares. Warburgs would receive a commission of £550,000 for this. This commission would be deducted from the proceeds of sale to arrive at the net proceeds accuring to the Exchequer. Davys advised me that this arrangement, which was designed to help secure the overall success of the placement, was acceptable. They did not indicate that any legal or Stock Exchange problems could be associated with it. Acting in good faith on this advice I did not dissent from the proposed arrangement.
At noon on 30 April, I was advised by Davy Stockbrokers that my total shareholding had been placed with institutions in Dublin and London at a price of £2.75 per share and I made that knowledge public by announcement. My information from Davy Stockbrokers at that stage was that the placing had been successfully completed and that no questions of any kind arose in relation to it. Greencore announced on 30 April that I had informed them of the placing and said that the sale had followed consultation between the company, the Government and their advisers, and proceeded with the active support of the company. The company's chief executive officer, Mr. Gerry Murphy, stated that the company was pleased at the successful placing of the Government's holding which removed the market overhang on its shares.
Yesterday, Wednesday 5 May, further information was made available to me by Davy Stockbrokers. They stated that the information they gave to me at 12 noon on 30 April was on the basis that by then, they had placed over 17.5 million of the 25 million shares and that they had made the arrangements with Warburg to take up shares in the placing up to a maximum of 10 million shares. They informed me that they subsequently revised the arrangements with Warburg's to include certain other purchasers. On Monday, 3 May, 1993 Davy Stockbrokers sought legal advice in regard to both the original and revised arrangements. That advice to Davy Stockbrokers is to the effect that both arrangements give rise to a number of difficulties due to the possibility of Davy Stockbrokers and parties connected with them being regarded as having an interest in certain of the placed shares in some circumstances. This could have led to difficulties in regard to the provisions of the Greencore articles of association which restrict holdings to a maximum of 15 per cent. I understand that this possibility arose for the following reason. The Investment Bank of Ireland, a member of the Bank of Ireland Group, already held, at the time of the placing, a 15 per cent holding. Davy Stockbrokers is also part of the Bank of Ireland Group. Any holdings by Davy Stockbrokers or any other part of the Bank of Ireland Group could, appearently, count in calculating whether the 15 per cent limit has been breached. Davy also received legal advice that there was a requirement to make disclosure to the market and to the other places of the situation that had developed.
All of the above information was also made known yesterday to the company and to its advisers, AIB Capital Markets. I arranged that it be made available to the Stock Exchange prior to the commencement of trading this morning.
I was not at all informed until yesterday on the revisions which Davy Stockbrokers made to the arrangements with Warburg which I have already described. Some information was given to me yesterday by Davy Stockbrokers. This was to the effect that 2.4 million shares were placed with Warburg's and that shares were also placed with individuals or bodies associated in some way with Davy Stockbrokers. Davy Stockbrokers informed me that they had given some form of assurance of comfort to Warburg that they would not lose financially as a result of taking up shares. I would stress that yesterday was the first time I received any notification that such arrangements existed, or were contemplated. As will be clear from what I have said, I have not got full information on these arrangements. I do not know the identities of the parties having some form of association with Davy Stockbrokers who agreed to take shares.
This afternoon Davy Stockbrokers supplied my Department with additional information on these arrangements. I understand that they intend making this information available to the Stock Exchange also. In the case of Warburg's, there was originally an arrangement that the commission fee of £550,000 would be shared between them and Davy Stockbrokers. Furthermore, Davy Stockbrokers would share any profits or losses arising from a shareholding that might pass to Warburg in order to complete the placing. However, ultimately, when Warburg participated in the placing for 2.54 million shares, the arrangements were revised on the basis that profits or losses would be for the account of Davy Stockbrokers and that the fee to Warburg's would be reduced to £100,000.
I was also informed this afternoon that 4.45 million shares were placed with Irish investors which of whom was connected in some way with Davy Stockbrokers.
I am informed that Greencore has obtained from the Stock Exchange a suspension for 24 hours in trading in the shares. The company did this, I understand, because of the opinion that orderly and properly informed trading in the shares would not have been possible today in the circumstances that have developed. In the circumstances I have decided to consult with the Attorney General on the legal aspects.
I would stress that I and my Department have at all stages acted in good faith and that I have taken every step that I was aware of to ensure that the placing was done in a way which met all Stock Exchange and any relevant legal requirements. I relied on Davy Stockbrokers to advise me on this aspect. As will be clear from what I have said, I informed the public, including shareholders in the company, of all significant developments as they arose.
Before the placing there was no indication to my Department from Davy Stockbrokers that any question arose as to the appropriateness, under Stock Exchange or any other requirements, of the pre-agreed arrangement it had made with Warburgs to take up shares. Davy Stockbrokers have informed me that the changes they made to the pre-agreed arrangement, which I became aware of for the first time yesterday, were made solely to ensure the success of the placing and that they were not done with the aim of securing a financial gain for any party having any association with them. They have also informed me that their decision to seek legal advice was taken totally on their own initiative and solely to clarify the matter and was not prompted by any questions raised by any other party. I am nevertheless seriously concerned and disappointed that important steps were taken by Davy Stockbrokers without either my knowledge or agreement.
The shares in Greencore are at present suspended and the Exchange authorities are examining the situation today to see if any of the rules of the Exchange have been infringed. I understand that Davy Stockbrokers have been asked to provide the Exchange with a full account of events. The initial task for the Exchange will be to clarify the facts concerning recent events so that the market in shares can be safely restored and the suspension lifted as quickly as possible.
In the event that any infringement may have taken place, it will be for the Exchange authorities to decide what action should be taken by them in relation to market participants. I cannot anticipate the outcome of that investigation. It may, or may not, give rise to further action by the Exchange authorities concerning possible breaches of rules or procedures. I expect that the Exchange will carry out a through investigation and that the authorities will take all necessary steps to satisfy the markets that the events have been fully examined. It is vitally important that no doubts or reservations will remain regarding the placing. I will, of course, ensure that my Department will cooperate fully with the Stock Exchange in its investigation. I expect that the Exchange will treat this matter with the greatest urgency.
The expected receipt from this placing totals over £69 million. This is due to be lodged to the Exchequer on 17 May. In view of what has arisen I am not in a position now to say categorically that these moneys will be received in full on schedule. I am awaiting legal and other advice on this.
In conclusion I would say that while these developments are most unwelcome to me and to Greencore they do not in any way detract from the economic worth of Greencore. The fundamental reality that Greencore is a very attractive investment with huge growth potential remains unchanged. The difficulties that have arisen in relation to this placing in no way whatever reflect on company performance, on the company management or on my Department.