Vol. 408 No. 8
9 Tomás Mac Giolla asked the Minister for Finance the expected date of the flotation of Irish Life; the total cost to the Exchequer to date of legal, consultancy and broker's fees arising from the sale so far; the names of the companies and the amounts paid in each case; the expected final cost; and if he will make a statement on the matter.
It is expected that the flotation of shares in Irish Life plc will take place in July 1991. Payments totalling £326,000 have been authorised to date, mainly in respect of financial, actuarial and legal services in connection with the restructuring of the company last year and advice in connection with the preparations for the flotation. The firms to which payments have been made to date are NCB and Goldman Sachs, the leading financial advisers, A. & L. Good-body, legal advisers, and R. Watson and Sons, actuarial advisers. As these payments represent only part or interim payments in respect of ongoing services, it would not be appropriate to indicate the amounts paid to individual firms at this stage.
I am not in a position to state the expected final cost of the flotation. Appointments in respect of some services have yet to be made and fees agreed. Furthermore, certain fees are related to the size and value of the flotation and an estimate could fuel speculation on prospective share values. I can assure the Deputy, however, that every effort is being made to ensure that the fees in respect of each service are at competitive rates consistent with ensuring a successful flotation.
Will the Minister confirm that the estimate for professional fees in connection with the Irish Life flotation is in the order of £1.5 million? Will he state when it is intended to set the stockbroking fees? Would he agree that those fees will amount to about 2 per cent of the total funds raised, which will add about another £4.5 million to the cost of floating Irish Life and bring it to about £6 million, a tidy windfall for the professional and stockbroking firms concerned, including NCB stockbrokers?
Any figures the Deputy tosses around at this stage are purely speculative as the total cost of the flotation including stockbroking fees and Euro syndicates——
What is the current estimate?
Is the Deputy talking about the total cost estimate?
Yes.
It will exceed the figure referred to by the Deputy.
Will it be as high as £6 million?
Yes, and perhaps more. I hope the Deputy knows the size of the flotation. The usual fee for stockbroking on a Euro syndicate basis is between 3 and 4.5 per cent, depending on various aspects. I hope to get that figure down to at least 3 per cent. I believe Goldman Sachs, financial advisors, will enhance the status of the floatation in view of the fact that they are an international company. We received proposals from many European banks but I believe Goldman Sachs are the best people to lead the Euro syndicate in this regard.
I thank the Minister for confirming that the total cost of the flotation will exceed £6 million. Would he agree that this is a very large sum of money to pay to various financial institutiosn who will be the principal beneficiaries of the privatisation of Irish Life? Can he indicate when and by whom NCB stockbrokers were appointed as one of the companies involved?
They were selected from 51 tendering firms. Eighteen full proposals were received subsequently and the contract went to the lowest tender. I am sorry to have to disappoint the Deputy but that is the reality. With regard to the selection of financial advisors, this was done by way of a competitive process. No fewer than 25 proposals were submitted and all tenders were accepted on a competitive basis. It may sound a lot of money but anybody who has any understanding of the market outside will know that Irish Life have to pay the going rate the same as anybody else relative to the market situation.
The stockbroking fees have not yet been agreed. Can the Minister indicate when the stockbroking fees will be agreed and what he anticipates the amount of those fees will be?
It is not for us to give away the negotiating hand of the Department of Finance. They are being negotiated at the moment and the Deputy and the House will have every opportunity when this is over to get full details of every cost aspect. At this stage I am not going to anticipate how successful the negotiations will be.
It is a unique way of tendering.
We have already had tendering from 51 people for it.
But the stockbroking fees have not yet been agreed.
We will let the Deputy do the business; maybe he would like to do it differently.
It is a blank cheque.
What you set out to do has not been successful so would you please accept that this House will get the full information whenever it is available and nothing will be swept under the carpet as the Deputy might try to suggest.
(Limerick East): Is it the intention of Irish Life and the Department to float the full amount of shares permissible under law on July 1 or will there be a proportion floated in July and a second tranche floated later?
The intention at the moment is that there will be certain allocations of shares from two or possibly three large corporations in Europe totalling 4 per cent or 5 per cent each and the rest will be floated, or it could work to 14 per cent or 15 per cent depending on what is the best strategy. My purpose in the whole operation is to get for the taxpayer the highest price possible and we will pursue the best strategy to get that.
(Limerick East): Will it be a once-off or a two-part flotation?
It will be a once-off floation to bring it down to 34 per cent.
