Vol. 501 No. 2
1 Mr. Noonan asked the Minister for Finance if shares will be offered under certain conditions to all employees of the TSB and the ACC in any stock market flotation of a merger; if he will support the demands of account holders in these institutions to have shares allocated to them; and if he will make a statement on the matter. [5554/99]
2 Mr. McDowell asked the Minister for Finance if he will provide customers of the ACC and the TSB with free or discounted shares when the merged entity is floated; and if he will make a statement on the matter. [5552/99]
I propose to take Questions Nos. 1 and 2 together.
As the House will be aware, the Government has approved a proposal submitted by ACC and the TSB banks that the two banks be merged and floated on the Stock Exchange. My Department is currently in discussions with both banks about the arrangements to be made for managing the merger-flotation and, in due course, I will introduce legislation to give effect to the merger-flotation.
As part of its decision on this matter, the Government also accepted the principle of a single employee share ownership plan for the staff of the merged bank and authorised me to enter into negotiations to this end with the parties concerned. The detailed terms and conditions of this ESOP remain to be negotiated, but I envisage that up to 5 per cent of the shares of the merged bank will be available for allocation to employees in return for significant, quantifiable and verifiable productivity enhancement and flexibility. A further 9.9 per cent of the shares will be made available to employees at a cost equivalent to the current valuation of the existing operations of the ACC and the TSB.
The question of free or discounted shares for customers arises only in the case of organisations such as mutual building societies which are owned by their customers. This does not apply in the case of the TSB or any of the State companies such as the ACC or the ICC. The proceeds from the sale of the TSB and public assets will accrue to the Exchequer. However, subject to confirmation that there are no problems in relation to domestic or EU legal requirements, I am prepared to reserve a specific number of shares at the offer price for long standing customers of ACC-TSB when floated on the Stock Exchange. I will shortly advertise for advisers in relation to the flotation process and the question of an allotment of shares at the offer price to long-standing customers is one of the issues that will be examined in detail by these advisers.
Is it correct to assume the Minister and the State are the ultimate shareholders in both cases?
In the case of the ACC I hold all the shares and in the case of the TSB I am entitled to the proceeds of its sale. As the Deputy is undoubtedly aware, the TSB is an unusual hybrid legal entity.
In motor racing parlance, therefore, the Minister is in pole position when it comes to organising gifts of shares or the sale of shares. I understand from his reply that he considered whether long-standing customers of the TSB or the ACC should get shares and decided they should not be allocated free shares but offered a number of shares at the offer price, the bids for which would be confined to long-standing customers. What does the Minister mean by long-standing customers? Does he mean deposit holders or any person who has done business with the ACC or the TSB over a long period of time? By "long-term" does he mean a period of time, the frequency of transactions or the quantum of business processed? The Minister said a number of shares would be offered. What percentage tranche of shares has he in mind? Is it 5 per cent or 10 per cent? He referred to the offer price. Will there be an obligation on long-standing cus tomers who purchase shares to hold those shares for a specific time or will they be able to dispose of them straight away, if they were so inclined?
I will bring the Deputy up to speed on what I envisage will be the process. In a short period of time I hope to be in a position to advertise for advisers. Such an advertisement will have to be placed in the EU Journal and national newspapers and a period of 52 days must elapse between the posting of the advertisement and the closing of that process. I expect advisers will be appointed in June. I will take advice from the advisers on the questions raised by the Deputy. He raised legitimate questions as to the percentage of shares I will allocate to long-standing customers. He also asked who would be classified as a long-standing customer. I will consider these matters when the advisers are appointed.
It is envisaged that the flotation of the new merged bank will occur mid-2000. Some time will elapse before we come to deal with the key questions posed today. As I said in my reply, I am not opposed to allocating a tranche of shares to long-standing customers at the offer price. There is no question of allocating free shares to customers of either institution, but I am open to the suggestion of allocating a specific percentage of shares in the merged bank at the offer price, subject to any further considerations under EU and domestic law.
I am disappointed by the Minister's response. Will he agree the position of long-standing customers of the TSB is analogous in some ways to that of members of building societies, in so far as the ethos of the TSB is different from that of the other commercial banks? The Minister should have given greater consideration to the possibility of allocating free or discounted shares to long-standing customers. Does he envisage the merger and flotation happening contemporaneously or the merger happening first, thereby allowing the position to settle, followed by the flotation?
The Deputy's point concerning long-standing customers was put forcefully to me, but I decided to specify the allocation of a tranche of shares at the offer price subject to the conditions I outlined. I am not prepared to offer free shares in either of these institutions.
I will appoint advisers in the next few months and, subject to their advice, I envisage the merger and flotation taking place at the same time. Both entities will cease to exist on the day the flotation takes place. The merger and flotation will happen simultaneously. That is what I consider the most appropriate way to proceed. Perhaps the advisers may advocate a different approach, but that is the stance I adopted in negotiations with the TSB and the ACC during the past 20 months since I became Minister. The idea that the TSB should be included in this process was not mooted when I first came to office, but it has been put forward since. My preferred approach is that the merger and flotation will happen simultaneously, subject to the advice of the advisers.
The Minister's reply is disappointing. I do not believe the different legal basis of building societies and organisations such as the TSB is sufficient to justify the different treatment proposed. One could argue that customers of the ACC and the TSB have made almost as big a contribution as the employees. The Minister said employees will be given 5 per cent of the shares of the merged bank as a gift.
No, not as a gift.
I will put my question and the Deputy can then respond to it. The Minister has proposed dividing 14.9 per cent of the shares into a tranche of 5 per cent and a tranche of 9.9 per cent and he referred to a mechanism for the 9.9 per cent tranche which I did not understand. Will he explain the manner in which employees can avail of the 5 per cent tranche and the 9.9 per cent tranche of shares?
This is subject to further negotiations with the unions. We have made a good deal of progress. There has been great co-operation between the trade unions and staff representatives of both institutions. The leaders in both institutions are farseeing. One would be amazed at the insight they have into the future; the management of other institutions could learn from them. Negotiations will have to take place on this process, but there will not be a free offer of 5 per cent of shares of the merged bank. Taking Telecom Éireann as an analogy, the five per cent share allocation to Telecom Éireann employees is for verifiable productivity changes and flexibility. I envisage a similar process in regard to ACC, TSB and ICC and that up to 5 per cent of shares will be allocated, as in Telecom Éireann, on foot of verifiable productivity changes and flexibility. ESOP will be offered 9.9 per cent of shares at the current valuation of the operations of ACC and the TSB. That is the situation in Telecom Éireann and is what I envisage happening in the ACC-TSB merger flotation to which this question relates and in the ICC deal which we hope to conclude in the middle of the year.
Will there be a scale of rights depending on seniority of staff?
We will learn a great deal from what will happen in Telecom Éireann because the unions are working in partnership with the advisers and the Department of Public Enterprise in that regard. These are matters for negotiation between the union representatives and management side.
What will pertain in Telecom Éireann will be more or less the template to be followed in other situations. The situations are not exactly the same and the process will be refined in ACC, ICC and TSB but the Telecom Éireann example is a pretty good starting point.
When the Government decided to dispose of ICC, agreement was reached with the trade unions and a guarantee was given that there would not be compulsory redundancies as any purchaser would be required to give an undertaking to that effect. Has a similar agreement been reached and will a similar undertaking be required in this case?
Yes. That has already been negotiated with the unions and in all my correspondence with them it has been set out quite clearly that there will not be compulsory redundancies in any of these institutions.
On a slightly different issue, will there be any safeguard against takeover for a defined period, for example, a five year period after the flotation occurs?
In the memorandum of understanding which was concluded between ACC and the TSB and submitted to me in the past month, it is envisaged that as in the case of the Irish Permanent there will be a five year moratorium which will prevent anyone acquiring a shareholding above and beyond a certain percentage. That provision is in the memorandum of understanding between the ACC and TSB, which I am considering at present. I do not have an objection in principle to it.
Does the Minister envisage a flotation of 100 per cent of the shares of the merged unit? Does he intend to retain a type of Golden Share?
The proposal from the ACC-TSB was initiated by the trade unions – I referred to the advanced thinking of some of the trade union leadership. This proposal was received with a certain amount of dismay by civil servants in all Departments, and not least by myself. The proposal was put forward by the trade unions and they envisage a total flotation of the company which is contained in the memorandum of understanding upon which we have agreed. The trade unions engaged in long and extensive discussions with their members before putting these proposals on the table. The intention is for a 100 per cent flotation of the merged ACC-TSB.
And the Golden Share?
It is not envisaged the Government will retain a Golden Share as was the case in Irish Life but as I said in response to Deputy McDowell, there will be restrictions on any individual shareholder acquiring more than a specified percentage for a period of five years. That could be regarded as equivalent to a Golden Share – a device used in the Building Society Act, 1989, to allow for the flotation of the Irish Permanent.
