(Limerick East) asked the Minister for Finance the reason (a) the Government this morning sold 12.5 million shares in Greencore at a price of 265p per share and (b) only one investor was allowed to bid for these shares; if he accepts that this transaction is in bad faith and contrary to the commitment given by the Government in the prospectus at the time of the flotation of Greencore; if his attention has been drawn to the fact that the price of Irish Life shares on the market is easing as a result of this breach of trust by the Government; and if he will outline the measures he intends taking the restore both broker and public confidence in the good faith of the Government.
Private Notice Question. - Sale of Greencore Shares.
I should like to thank the Ceann Comhairle for allowing the question and Deputy Noonan for enabling me to comment on the matter in the Dáil.
The Greencore prospectus included the statement that the Minister had no current intention of disposing of the shares he retained after the offer for sale and that in the absence of unforeseen circumstances he would retain them for not less than two years. There was, however, a significant change in circumstances between the time the prospectus was published in April 1991, when the Programme for Economic and Social Progress negotiations were also completed, and in January of this year when this year's budget was being finalised. In drawing up the budget it was found necessary to change the intended timing of implementation of certain elements of the Programme for Economic and Social Progress. The budget in addition reflects income to £53 million to be generated by asset disposal. This sum includes a figure of £35 million miscellaneous capital receipts as a target to be realised by the disposal of Greencore shares.
During the last few months the Government received two separate approaches to buy part of their stake in Greencore. In the light of the changed circumstances it was decided to investigate the feasibility of such a sale. Legal advice was sought on the statement contained in the prospectus, and it was deemed that a sale of Greencore shares was in order at this time.
Regarding the method of disposal, the Government were guided by the desire to minimise the impact on the market demand for Greencore shares. The company are now reviewing their business strategy under new management and the Government did not wish to be seen to cut across any plans the company might have to raise further equity. Furthermore, by delaying the sale of Greencore shares to the end of the second year since March 1991 an overhang might become evident by the autumn of 1992. Accordingly, a swift single transaction should leave market demand intact. Furthermore, had the Government announced their intention to sell these shares in advance, the potential impact on the market would be greater and the price achieved might have been affected. No further sales of Greencore shares will take place this year.
The practice followed in selling the shares was perfeclty normal and proper. A shareholder in a public listed company is free to accept an offer for the purchase of his shares. Such an offer was made to me at a fair price and thrre was no good reason why I should reject it. The sale took place at a discount of 3.3 per cent on the market quotation prior to sale of 4.7 per cent on yesterday's quoted price. Sale by way of placement is always on the basis of a discount and by reference to normal practice the discount granted in this case was a modest one. There is no obligation on any shareholder, notably a major shareholder, to offer his shares for sale to a number of bidders. Placement of shares by a major shareholder in the manner I have done is perfectly normal and accepted practice and was followed with a view to the least disruption of the market.
The sale reflects the confidence of investors in the company and I am satisfied that the successful placing of this block of shares will be welcomed generally by the investing public and will underpin the value of these shares. The new management structure which has been put in place in the company in recent months has contributed greatly to the perception of the company as having considerable potential for growth and development. The recent annual report and accounts of the company show their financial strength. I, like other investors, have every confidence in the future of the company.
(Limerick East): Is the Minister aware that the manner in which he organised the sale of these shares is seen on the market in Dublin and internationally as outrageous, underhand and in bad faith? I would put it to the Minister that the Government are not in a position similar to that of any other shareholder and that he is in clear breach of Government policy in playing favourites with this tranche of shares and not offering them at public tender. I would further put it to the Minister that the discount of £1.87 million on yesterday's quoted price is very bad value for the taxpayer Is the Minister aware that this afternoon the shares are being sold at £2.70 each which represents a capital gain of £625,000 to IBI, the company which the Government favoured in this deal?
In reply to the last part of the question, just before I came into the House the Reuter screen showed a price of £2.72 per share——
(Limerick East): It was £2.70 at 3 p.m.
——which is an excellent price and it is holding up extremely well. The Deputy will acknowledge that if 12.5 million shares were put on the market, from advice I have received, it would cause great disruption and whether or not we could sell them would have led to a big debate. Second, it would have had a greater effect on the price. Therefore, it is better to deal with one reputable client who buys shares for several pension holders and holds them on the market rather than trading them. If they were to be traded as individual shares day after day for a number of weeks it would have an adverse effect. The logic which is always followed when a large tranche of shares are sold is that they are dealt with on one exchange, particularly if the buyer is likely to hold them for a considerable length of time, which is obviously what will happen in the case of IBI who intend to hold the shares in trust for pension funds.
They can be sold at any time.
They have made a profit of £1 million already.
Perhaps in different circumstances Deputy Noonan would argue that we should sell the full 45 per cent State share. It was indicated both in the budget and in the prospectus of last year that they would be sold, and this would create an overhang in the market. My original intention was to hold the shares until the end of the year. However, I was advised legally and professionally by a number of people that to do that would not result in the best price for the State and the taxpayer, but by selling them now to a reputable bidder we would get a much better financial deal, and that is what I did.
(Limerick East): Is the Minister aware of the widespread concern because of the nature of the transaction in that Davy Stockbrokers, who acted for the Government in the sale of these shares, are 90 per cent owned by the Bank of Ireland and IBI who bought the shares are a totally owned subsidiary of the Bank of Ireland. In effect, the arrangement has been made between two subsidiaries of the same bank. Now that the Minister has confirmed that before he came into the House the Reuter's price was £2.72 per share, would he agree that the discount was excessive considering that the purchase price has increased from £2.65 this morning to £2.72 at present, resulting in a profit for IBI of approximately £900,000 on this deal and that this is very bad value for the taxpayer?
I would put it to the Minister that it was absolutely outrageous for himself and his Department to sell shares so close to the publication of the High Court report on the scandals in Greencore. Considering that certain Government Ministers already have access to the information in this report, it amounts to little short of insider trading for the Government to proceed with the sale of these shares. Finally, I put it to the Minister that the commitment in the prospectus of the company is clear-cut, that the Government had no intention of diminishing their tranche of shares and, even in changing circumstances, they had no intention of diminishing their shares within a two-year period. A similar commitment, in exactly the same words, is given in the prospectus of Irish Life. There is now a wide mistrust of the Government's word. As the public and the international financial community cannot trust the word of the Government I put it to the Minister that he has inflicted serious damage on the Irish economy.
The Deputy has raised a number of points. The discount of 3.3 per cent yesterday and 4.7 per cent today is quite low and is a very attractive offer when compared with the 12 per cent difference between the price of the shares when floated last April and the price in early dealings.
They cannot be compared.
It is much lower than any price mentioned to me in discussions since budget day. I have already said that my original intention was to hold the shares until later in the year when we would be nearer the April 1993 deadline, but I have been advised, both legally and professionally, that that was not the best deal for the taxpayer and was not the best way to handle the issue. I absolutely refute any question of insider trading, which, if I understand Deputy Noonan correctly, he is alleging on the basis that some members of the Government — not necessarily myself, who made this decision — would have knowledge of the report.
No member of the Government has knowledge of the High Court Greencore Report. Therefore, although I accept that the Deputy is making his allegations in good faith, I presume that he will equally withdraw the allegations on the basis that no member of the Government has knowledge of the contents of the report.
(Limerick-East): I alleged that you were leaving yourself open to that suspicion. I accept your word.
I want to make that point absolutely clear.
Finally, I want to make clear, because it is a fair question that Deputy Noonan is asking, my intention in relation to further Greencore shares and in relation to Irish Life. I have now realised the figures that were in the Book of Estimates so there would be no further sales of shares during 1992.
(Limerick-East): Of Irish Life?
Of Irish Life.
A Leas-Cheann Comhairle——
A Leas-Cheann Comhairle——
The Deputies will realise that in respect of Special Notice Questions it is taken that the party spokesperson is privy to the accumulated wisdom of his or her party. In respect of the questions put, Deputy Noonan would have demonstrated that and therefore it is not my intention to have any further questions in respect of the matter.
A brief question.
I shall be brief.
On a point of order, a Leas-Cheann Comhairle, with respect, we are all Members of the House. I wish to raise a very brief and relevant question on the issue. I will take no more than a moment to raise that question and I should like to have your indulgence.
If the Deputy says that he has information or anxieties different from those expressed by his party spokesperson then I shall take him at his word and hear what he has to say.
Would the Minister not agree that if a sale of State assets is being effected the people of this country should be given an opportunity to acquire such assets? Could the Minister tell the House whether it is now part and parcel of Government policy to sell State assets to meet current expenditure? Would the Minister agree that in the light of the promises made in the prospectus what has happened today has resulted in there being a whiff of financial sleaze coming from this Government?
I reject the last comment. The figures were part and parcel of the budget day statement and the programmes in the budget.
The Government were asked for a current budget deficit.
Naturally, the Government did not identify the company involved, but it was not very difficult to make a deduction; and I am sure that most people involved in the marketplace were fairly clear on it because it was mentioned to me several times at various meetings in recent weeks. I did not confirm or deny that issue because it could have concerned other companies and it would have been wrong for me to do so.
I have been advised, as I said earlier, both legally and professionally that this procedure was the best way to get the best value, as Deputy Noonan has said, for the shares. If that amount of shares, approximately 15 per cent, were put in the open market then the recovery of price would not have been achieved.
It would have been a bit less.
No, much less would have been received. Everybody agrees on that. The share price that the State received——
No, the Government could have sold fewer shares over a period of time.
That could have been done, but I was advised strongly that that would not be the practice to follow.
On the basis you would always do special deals on the entirety of our State assets?
I should like to answer Deputy Shatter's final question. I listened carefully to the questions. It is the policy of the Government, and it has been for several years, to sell State assets on an annual basis, apart from major sales such as the Irish Life flotation or the original Greencore flotation. In some years those assets might be Garda houses, Army houses and so on. At one stage my predecessor mentioned an ongoing figure of £50 million. This year there was no other major sale. I have to consider two particular areas.
I think I have clarified what was a fair question from Deputy Noonan. He asked me to give a clear statement and I have done so. I have achieved the figure referred to on this sale. I do not intend to sell either further shares in Greencore or Irish Life.
I thank you, a Leas-Cheann Comhairle, for allowing me to ask the Minister for Finance a supplementary question.
Would the Minister confirm that the Government have effectively broken their own rules by giving privileged information to one investor to buy the shares? The Minister stated in the House today that he has done nothing wrong and that the deal represents exceptional value for the taxpayer. Would he confirm that the Association of Investment Managers have been in contact with him today to ask him to revoke the deal? Why would they be doing so if they felt that everything was in order and that the investment was good?
First, I should like to say that it is not a question of the Government just dealing with someone on the market. As I said in my original reply, the Government were approached by two different investors and are responding to an offer made. Frankly, a few weeks ago I should not have thought that we would get such a good offer. In responding to the offer made I was very careful to check both the legal and the professional advice as to whether the circumstances of budgetary matters permitted the Government to make a decision. I checked and rechecked that advice. I was advised from all quarters that this matter was not in bad faith, was not in any way legally wrong and was an acceptable practice. I made sure of that before any decision was made.
: I shall hear a final question from Deputy Jim Mitchell. The House has already given almost 25 minutes to this issue.
(Limerick-East): Were the investment managers on to you this morning to revoke the deal, Minister?
The investment managers?
The Association of Investment Managers.
The Association of Investment Managers, in the normal good relationship that the Department of Finance have with them, were informed before I made a public statement.
(Limerick-East): Did they ask you to revoke the deal this morning?
No. To be absolutely factually correct, they asked whether I would meet them in the next few days and I said that I would.
(Limerick-East): Because they were concerned?
They did not ask me to revoke the deal.
They are very concerned. That is why they asked the Minister to meet them.
Would the Minister not accept that widespread public concern is more than justified in this instance when, for example, someone can make £900,000 — on his own estimation — in a matter of hours? Would the Minister not agree that the issue resurrects the impression of a golden circle in this country that benefits greatly from Government decisions and that it is entirely reprehensible that he should allow this decision to be open to that interpretation? Moreover, would he not agree that concern is all the more justified by the fact that last April the Government gave their word that there would be no further sale of these shares for two years, yet only ten months have elapsed? How can the Minister's word be trusted again?
I call the Minister for a final reply.
Thank you very much, a Leas-Cheann Comhairle. I am glad to answer all of the questions.
The Minister is glad that it is the final answer.
I said at the outset that I was very glad to take the opportunity to reply to this question. I almost had to ask that I be given the opportunity. I thank Deputy Noonan for raising the issue. I consider that that answers the final part of Deputy Mitchell's question about widespread public concern. I should like to assure Deputy Mitchell that if I thought that IBI would buy the shares and sell them tomorrow——
There is no restriction on them; they could sell them today.
——then I should not have concluded the agreement. The Deputy should be very careful. IBI have been an extremely reputable company for many years.
No one is saying that they are not.
They are a very reputable company in the Irish market. It is highly unlikely not only that the company would sell the shares now but also that they would sell them in the long term. IBI have bought the shares for five pension funds, as I understand it, for long term holding, and sale is not their intention.
It is possible, though.
That is not what was said ten months ago.
If the shares were put into the marketplace in the normal way that is precisely what would happen and that would cause the share price to fall. An understanding of the stock market indicates that it is much better to sell a large holding to an investor who will hold it——
The same as the promise the Government gave.
——and who would also have the long term concern of helping and assisting in the development of a company in which the State have reduced their holding. That is where it is a very good sell for the long term good of the company, the taxpayer and the State.