Vol. 510 No. 4
6 Mr. Noonan asked the Minister for Finance the plans, if any, he has to proceed with the proposed flotation of shares of ACC and TSB; if the shares will be offered to private investors as well as to financial institutions; and if he will make a statement on the matter. [22524/99]
7 Mr. McDowell asked the Minister for Finance the position regarding the proposed merger between ACC and TSB; and if he will make a statement on the matter. [22715/99]
I propose to take Questions Nos. 6 and 7 together.
Following a joint submission from the boards of ACC and TSB, the Government agreed in principle on 16 February 1999 to the merger and flotation of ACC and TSB. On 1 April 1999, I announced the establishment of a non-statutory board for the new bank under the chairmanship of Mr. Matthew Barrett to assist me in planning the merger-flotation process. On 27 July 1999, Mr. Padraic O'Connor was appointed chairman of the non-statutory board following Mr. Matthew Barrett's appointment as chief executive officer of Barclays Bank.
On 27 May 1999, following a competitive tender process, I appointed IBI Corporate Finance Ltd. and Davy Stockbrokers in association with Donaldson, Lufkin & Jenrette International as my financial advisers and lead brokers, and Arthur Cox, solicitors, as my legal advisers for the process. My officials have been working with ACC, TSB, NewBank and my advisers on the development of plans for the merger and flotation. Among the matters to be considered in the run up to a flotation would be the proportion of shares to be allocated to institutional investors and to the general public as well as to long-standing customers. I have already indicated that I am prepared to reserve a specific number of shares for long-standing customers of ACC and TSB at the offer price, subject to confirmation that there are no problems in relation to domestic or EU legal requirements. Work is also on-going in the preparation of legislation to effect the merger and I intend to submit the heads of a Bill for Government approval early next year. I intend to present the Bill to the Oireachtas for enactment early next year.
Following a number of meetings between the parties during September and October, partnership arrangements between management and unions under the auspices of an independent facilitator are currently being put in place. I understand that management also intends to open discussions with the unions in the near future in relation to their plans for the merger of the two banks, which could be implemented early next year. In that context, discussions will be held with staff in relation to an ESOP. As I have previously advised the House, 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 for purchase by employees.
The merger and transfer to the private sector of ACC Bank and TSB Bank is in the best interests of the staff and customers of both banks. Recent developments in the banking sector only serve to re-emphasise the need to push ahead with this and I will be keeping the position under close review in conjunction with the board of NewBank.
I thank the Minister for his informative reply from which a number of questions arise. Can the Minister assure the House that the industrial relations difficulties which looked like putting the merger-flotation off the rails have been overcome, or do I understand from his answer that he is simply putting a process in place to overcome these difficulties? Is it the intention that 100 per cent of the merged company will be floated by way of public offer or will it be a partial flotation? Is the Minister open to the purchase of the merged entity by one financial institution or is it his view that there should be a full, open offer where a multiplicity of private and institutional shareholders would participate in the purchase?
As regards the industrial relations difficulties, despite the fact that I do not think it appropriate for the Minister to intervene in these problems, I have spent much time in recent months trying to resolve some of the peripheral industrial relations problems. In that context, I mean industrial relations in the broadest sense and not specific problems. These efforts were designed to get over the problems of getting the staff on both sides into a process. In recent times both sides agreed to the appointment of a facilitator, Mr. Phil Flynn, who has been working over recent weeks as a result of meetings I had with both sides to develop the process.
Regarding the second question, the decision of the Government relates to merging and floating 100 per cent of the new entity. Therefore, the Deputy's third question does not necessarily arise.
Since making the decision to merge and float we have not made as much progress as I would have liked due to industrial relations difficulties. It is, however, still my intention to merge and float 100 per cent of the company.
Is it not true that behind some of the difficulties which have arisen in the past three months is a fundamental flaw, namely, the decision to merge and float at the same time? Is it not also true that TSB management is taking over ACC in advance of the formal merger, and that that is causing inevitable tensions?
It is necessary to recap on some of the history in this regard. The idea of a merger-flotation of ACC and TSB did not come from the Government. When the idea first came from the ACC group of unions, nobody was more surprised than myself while my officials had to be carried out of the office when this suggestion was made as we did not think it would be put forward. After some considerable time a response came from the trustees of the TSB who said the way forward was to merge and float. This idea came from the staff. I remember that after a wide consultation process there was a 97 per cent acceptance in the ACC of going this route. I wish to place on record that it was the staff who decided on the merger and flotation.
Perhaps I should clarify the question as I do not dispute anything the Minister has said. I was suggesting that the flaw was the decision to merge and float simultaneously rather than first merging the two entities and floating at a later stage. That is the issue.
I had some further discussions with my colleagues in Government and having assessed everything we decided to go with this merger and flotation proposal. This is still the position.
The Deputy's second question relates to a perception which may have caused some of the difficulties referred to earlier. Although this idea originated among the ACC staff, in recent months the perception may have been that this was a take-over by the TSB of the ACC. That is why I have had to spend some time in recent months liaising with staff representatives. A facilitator has been appointed in order that any extant difficulties and perceptions can be dealt with as speedily and effectively as possible.
I repeat what I have said many times to the unions and their representatives, namely, that this is a merger of equals. The raison d'être of the proposal was a merger of equals, that the newly combined bank of ACC and TSB, referred to as “New Bank”, would be a stronger and better financial entity, and that is what we have bought into. I repudiate the notion of a take-over by one side or the other. The process will not work unless everybody agrees it is a merger of equals. Mr. Flynn has taken the job of facilitator and I hope he will be able to resolve any problems that arise.
I put it to the Minister that the atmosphere for a public flotation of ACC-TSB is not as good as it would have been a couple of months ago. I also put it to him that he took too robust a view in his discussions with the Minister for Public Enterprise, Deputy O'Rourke, on the appropriate offer price for Eircom, and the fact that Eircom is today trading 13 points below the offer price and 500,000 citizens are showing a loss on their investment is reducing the enthusiasm for any flotation proposed by the Minister since quite clearly he got the offer price of the last flotation wrong and many people got their fingers burned.
I certainly accept that the climate of flotation in terms of financial institutions has changed considerably in recent months. The perception of Irish financial institutions and their valuation has changed remarkably in recent months due to the convergence of a wide variety of things. One has only to look at the price at which one can now buy major banking stocks in comparison to the price last February or March. I agree with the Deputy that the climate has changed in terms of appetite for the flotation of a financial institution. However, one must remember that the idea behind the merger and flotation of ACC and TSB, which the staff representatives suggested, was to ensure the new entity was far better than the two individual entities. On a number of occasions I have repeated that I do not see a role for two small financial institutions, something with which most people agree. The events of the past couple of months in terms of the financial stocks of other financial institutions bears this out. Therefore, the reasoning behind having a better and stronger joint operation still stands.
The Deputy's second question related to Eircom. The price of Eircom shares was set by the Cabinet sub-committee and I am very pleased with the price at which the stock has been trading in recent times. About 500,000 people applied for Eircom shares and there are about 10,000 employees. Therefore, according to my calculation that left about 3.1 million people who did not have the financial muscle to buy Telecom Éireann stocks from savings or to raise money from their local financial institution. The job of the Minister for Finance is to speak up for those people. I would look a right idiot today if the stock was trading very high and the Deputy was rightly saying I set a price which was too low. I did a great deal on behalf of the plain people of Ireland.
Many people got burned. The Minister burned so many people they will never again buy an Irish share.
Does the Minister intend including in legislation concerning the merger and flotation a provision which would prevent the sale of more than, say, 15 per cent of the shares to any one entity within a period of time, as was done in the case of Irish Life?
That is a consideration which will have to be borne in mind when I bring the legislation before the House and nearer the date of the merger and flotation. The concept referred to by the Deputy has been used in previous mergers and flotations of State institutions and I will give the matter further consideration. At this stage I have made no principled decision on this issue.
