Greencore Shares Placement: Statements.

Minister for Finance (Mr. B. Ahern):

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.

Mr. Yates:

I do not know if the Minister has come to terms with this fiasco but throughout his entire handling of the Greencore matter he has shown the hallmark of gross incompetence, negligence and ineptitude on an unprecedented scale. The Minister succeeded at one stroke in creating a position whereby Greencore stock could go into freefall and the reputation of the Irish financial services market is flashing across the world as a dodgy one. That was some achievement by the Minister last Friday. It is appalling that we have come to this state and, at the end of the day, the Minister for Finance, as owner of the shares and the Minister responsible, must take full responsibility and culpability for this disaster.

It now transpires that a series of appalling errors of judgment has been made by the Government and its stockbrokers in the sale of 25.4 million Government shares in Greencore. The Minister for Finance must explain his handling of the entire affair. In hindsight it has proved a grave error of judgment to have sought to raise so much capital so soon after raising £105 million through the flotation of the shares in Irish Life. It was overly optimistic to expect that there was the level of capacity in the Stock Exchange to raise £175 million in two flotations in a few days.

I am advised — and I heard a recording of it today — that the Minister and Deputy Rabbitte were on radio at lunch time last Friday. The Minister expounded this excellent deal, its value to the taxpayer and he commended Davy Stockbrokers. At the very time he was speaking some of the morning deals were being unwound. A shareholder would be very incompetent not to know what is happening to his own block of shares.

Some of the original early morning purchasers of up to 17.5 million shares declined their positions in the afternoon. It appears a London merchant bank had undertaken, in the view of Davys, to buy some ten million unsold shares. During Friday it became clear that the amount of unsold shares was in the order of 7.5 million, 9 per cent of Greencore. When they were offered to Warburg in the afternoon it refused to take them and the stock was dumped. It seems incredible that Davys were under the impression that Warburg would take up to ten million shares yet when it was offered them it stated that the agreement was to take up to five million. That goes beyond incompetence. Somebody was not telling the truth. Somebody must have asked what would happen if Warburg refused to take all the shares.

The subsequent placement of the unsold shares was such that there must have been question marks about their suitability. Why did Davys of their own volition, telephone their solicitors, Fry and Sons, on Monday to find out if there was a dubious element to the deal? They must have known. Did it not appear strange to the Minister when he got the list of the purchasers that there was a clear breach of the 15 per cent? Did he not even check the names of the financial institutions? When the stockbrokers sought legal advice it subsequently became clear that the holdings were in breach of the articles of association of Greencore, namely, that no single shareholder could have within their sphere of control a 15 per cent stake. Hence, we have the crisis today where Greencore stock was suspended at 8.30 a.m.

The Minister must state the full details of all these transactions and whether he is satisfied as to the truthfulness of the information he received at all stages from the stockbrokers. He must clarify what stock remains unsold and the Government's intention as regards taking it back. Once the 24 hour period has elapsed, what will happen to Greencore? It is the innocent victim in all of this and it now finds that its share value could be in freefall. It must also be announced whether those who bought the 17 or 18 million shares in the morning now want to unwind the position or whether they are still happy to buy at £2.75 a share. My understanding is that the biggest financial institution agreed, if the Government would buy the balance back. However, there has been a shift in the position since then and the clearing price would be much lower, at £2.50 or £2.60 a share. We all know that in dealing in stocks and shares, the dealers' word is their bond. We are now in the position that we do not know if a false or a fair market existed in Greencore stock last Friday. Clear, unequivocal answers must be given to those questions.

The explantions rendered thus far by the Minister and by Mr. Davy have been wholly inadequate. Why was it only on Friday afternoon in the middle of the share sale that it struck the stockbrokers that seven million shares, or 9 per cent of the holding held by Warburg, would be excessive? Why was that not thought of in advance? The question must be raised as to whether there was a full or a false market for the shares. Why was the contingency plan to sell the seven million shares introduced so late in the day which, possibly, was in breach of the articles of association? The Minister must give clear answers.

My understanding is that the bank involved was Warburg and the Minister has confirmed that. It offered to take up five million shares. When it was asked to buy eight million shares, it declined. The Minister must clarify if this is true and, if so, the allegations of incompetence must be replaced by ones of improprietry.

The damage to Greencore by the Minister's appalling handling of this entire matter is inestimable. It was obvious from the outset that Greencore favoured the sale by private placement, not by flotation, to a strategic, minority stake-holder, namely, Archer Daniels Midland. Due to the internal Government paralysis, whereby Labour and Fianna Fáil could not agree and the Minister could not convince his Labour colleagues of the merits of this deal that he and the bosses in Greencore favoured, he was not able to deliver. We had the bizarre incident where one office of ADM in Chicago denied it made a bid while its European office said it had made a bid. The Minister announced that there was a firm bid and it subsequently transpired that there was a letter of offer faxed at the request of Davys.

The loss of a strategic partner to develop and grow its export business was bad enough, but to find its shares suspended and a cloud of incredibility hanging over the company is simply unforgiveable. The effect on the share price when trading recommences is as yet unknown.

Investment Bank of Ireland owns 14.9 per cent of Greencore stock. I understand that they were not involved in any share purchase. The relevant fact here is the 15 per cent limitation on any one shareholder in Greencore under its articles of association. The Minister must clarify how the question of exceeding the limitation within a sphere of control arose and what legal advice he obtained in that regard. He must state the financial institutions relating to the Bank of Ireland which were involved in share purchases instead of Warburg. In any system of accountability somebody must take responsibility for this catastrophe. The Minister for Finance and the Government's stockbrokers have acted so incompetently that I fear enormous damage will be done not only to Greencore but to the entire Irish financial services sector. I have spoken to brokers already who travel to London on a weekly basis in an effort to sell Irish stocks. They are afraid that on top of the Telecom scandal and the previous troubles regarding Greencore, we will be known as the dodgy market of Europe. That is an incredible situation, despite the best efforts of Greencore to expand their fine business.

The Minister must clarify to what extent the articles of association and/or the Stock Exchange rules have been breached by transactions of these shares in Greencore. Competitors and opponents are already citing this débâcle on a par with the Blue Arrow financial scandal in the United Kingdom. The central question is whether there is a full market for those shares. In other words, the people who bought at £2.75 a share did so on the understanding that there was a full demand for the shares. It subsequently transpired that at that price there was not. The realm and depth of this scandal will greatly deepen if it transpires that there was never a full purchaser for those shares. That question must be answered by the Minister today.

The unavoidable conclusion from this entire sorry saga is that the Minister must take responsibility and take the only honourable course of action open to him by resigning his office. If this happened in another parliament in Europe the Minister would have resigned already. It is unacceptable that due to a combination of circumstances, so many people were intentionally or otherwise misled by the Minister. The Minister's statement this morning fails to respond adequately to the gravity of the situation. The Government must act swiftly to take back any unsold shares in order to sustain a price of £2.75 per share. An immediate statement to this effect is the only way to restore order to Greencore's stocks.

This débâcle is without precedent. It is now obvious that the Minister for Finance should not have sought to unload so many Greencore shares simultaneously. In the case of Irish Life, the Minister unloaded only a little over half of the total stock. Why did the Minister insist on dumping Greencore's entire stock at this time? He should not have taken this action so soon after the Irish Life flotation. The Minister should have opted, as he originally intended, for a private placement. He and his Department took for granted assurances and made assumptions which have now proved to be invalid. There is no indication in the Minister's speech that throughout the share sale he or his officials scrutinised — as any shareholder would — every aspect of the process of selling 25 million shares. All of this resulted in the Minister making an ass of himself last Friday on the national airwaves. Even he must realise that his credibility is at an all time low. Lame excuses are not enough.

It is important, given the gravity of the matter, that we have a constructive debate because Greencore must work its way out of this mess. There is a number of options open to the Government. This matter is so important to the taxpayer and to the credibility of the Irish market that it is imperative some skilful control is now taken. I call on the Government to offer the unsold portion of the shares — whether that is 15 million or 10 million of the 25 million — to ADM in the first instance. I understand they were prepared to offer a price of £2.70 per share. Negotiations should commence on this immediately. Alternatively, to avoid an overhang of these shares on the market, the Government should negotiate a market clearing price of say £2.60 or £2.50 per share because it cannot be left in limbo with the unsold stock. The balance in terms of the loss on the sale should be borne by the stockbrokers. Lucrative gains can be made when things go well but when they go wrong a penalty should be paid. That premium should be paid in this case by the stockbrokers, given their culpability in the matter. It is only reasonable that they should make good to the taxpayer by penalty for their errors.

What happened here was very similar to that which occurred in GPA. Any stockbroker can come to the Minister and say that he will get £3, £2.90 or £2.80 for his shares. However in this case the shares seem to have been over-priced. I find it incomprehensible that it took almost a week for the Minister to realise how far he was out of line. It is management by remote control. The sums involved and the credibility aspects for the financial services sector are so serious I cannot understand how the Minister was so negligent and so complacent in his handling of this matter. He should reflect on all that has been done to set up the financial services sector, to build up the official listings on the stock market and to move away from our dependence under the shadow of London. That credibility has been destroyed at the stroke of a pen. Greencore is a fine company with 18 per cent net return on its sugar business, with a profitable malt and barley business. Gerry Murphy and his colleagues have done an excellent job, yet the Minister has succeeded, by his ideological paralysis within Government, his botched handling of ADM and now his hamfisted dealings with Davy Stockbrokers, in converting what should have been a profitable move into a nightmare. At the end of the day the Minister must accept responsibility, do the decent thing and resign.

Mr. Cox:

This debate which we sought in this House this morning gives no one here cause for pleasure. If those in whose trust this matter has been placed had done their job competently and properly we would have had no need for this debate.

I wish to focus my comments on two areas. One deals with the business aspects and the other deals with the political aspects of this affair. It is important to put the background of events into perspective. This is not a problem which crept up on the Minister for Finance or his appointed advisers. From the week of the budget late in February, when the Minister for Finance first confirmed in public the Government's intention to dispose of its remaining shares in Greencore, we have witnessed an unending series of unforced errors, poor judgment and gross incompetence.

The situation appeared to resolve itself last Friday with the reported sale of the Greencore shares by the Government stockbrokers, Davys, at a valuation of £2.75 per share. The Minister was quick in that context to acknowledge his role in the matter and declared himself happy with the outcome. Indeed, he went on to express his thanks and congratulations to his brokers in this House last Tuesday during the course of the Adjournment Debate. Not to be outdone in this regard, his colleagues in Government, the Labour Party, last week rushed to print that it was their negotiations behind the scenes that had forced the price up to £2.75. Where are all the Labour Cabinet Ministers today with the egg on their collective faces for this failure of partnership, failure of nerve and failure of policy? They were quick to claim that they had held the day and caused the improvement in share prices.

That improvement in share prices brings me to the most unpleasant aspect of this débâcle. In all that has been revealed during the past 24 hours no member of Government, no one in the Irish business community, the Stock Exchange or the company involved comes out on top. Unfortunately for Greencore, it is now embroiled in further unnecessary controversy, an innocent bystander of political nonsense which has been at the heart of this Government from the first day the suggestion to dispose of the assets was made. That is a failure of this Government and Greencore carries additional misfortune not of its own making.

The Irish Stock Exchange has been sucked into this highly negative and injurious publicity. This negative publicity arises directly from failures on the part of the Minister for Finance and his advisers to conduct their affairs with due discretion and decorum in relation to the disposal of assets held in trust by him on behalf of the public. It is unfortunate, too, for what it reveals about the behaviour and standards at the highest echelons of blue-chip Irish business — a topic I wish to return to. It is most unfortunate for our political process which, in this most straightforward matter of the disposal of State assets, has revealed through inter-party points scoring in Government, gross incompetence on the part of the Minister for Finance. They are not up to the task.

Today at lunchtime in the course of a passive, poor, incomplete and inadequate explanation given by the head of the Government's stockbrokers, Davys, we were informed of an unspecified arrangement with an unnamed London merchant bank, now named by the Minister as S. G. Warburg. According to that interview this arrangement was to take up a significant tranche of shares in Greencore in advance of the general placing of those shares on the market. It would appear from the comments made that the stockbrokers are, or were, of the opinion that it was not in the best interest of the placing to go to that London bank as it would, according to Mr. Brian Davy, not normally be perceived as an investor in Greencore, and the market might feel that the holding was therefore not "in firm hands". What did the Government's key adviser on this matter mean by that phrase? If that was his view as broadcast on the radio — and I am sure it was his view last Friday — why did the Minister for Finance, whose agent he is, know nothing of this affair? The Minister has pleaded ignorance but he should be held accountable and made responsible for this matter. In plain English, outside stock exchange speak, will the Minister elaborate and clarify the detail of these arrangements? The Minister stated that he learned the details just before he came to the House today. Surely the Minister has a duty to be informed of these matters? He is entrusted by his colleagues in Government to dispose of this matter in the public interest and those of Greencore and the State. The Minister failed to discharge his duties.

Specifically if the deal with the bank was perceived by the Government to be unfair, the Minister and his advisers consider that S. A. Warburg took up the expected number of shares on Friday? Did they regard it as merely a short term holding operation which would immediately take up shares from the market while potentially disposing of them at an early date?

Mr. Brian Davy went on to say that he as the Government's adviser had chosen, instead of the London bank, to introduce "additional placees close to us". Is the Minister prepared now to name those people? Surely the Minister or officials in his Department must now be in possession of knowledge of which he said he was in ignorance for so many days? It is incredible that the Minister can come here and say he does not have the information which he is obliged to have. He should have received the information from his agent whom he has been appointed. That agent would have made sales on behalf of the Minister and he should know who those placees are? Who were those people on the inside track? The public have a right to know. This matter will be unravelling at a public cost and the Minister is the person ultimately responsible for imposing that cost. The Minister must inform this House of the names of those in the new golden circle who have been discovered in the past 24 hours.

Staggeringly, the senior adviser to the Government went on to comment on the débâcle which has now emerged in a manner that suggests he had not quite realised or anticipated the problems which would arise. He stated he did not realise the implications of the 15 per cent limitation in Article 11 B in the articles of association of Greencore. I cannot accept that observation. It is a pathetic excuse from a quarter which, far from being ignorant or innocent in this regard, advised the Government on this matter and in respect of the appointment or warrant issued by the Minister. The Minister sits here with his head bowed in shame at what has happened here in his name in the past seven days.

The disposal of shares now in question has been on the Government's agenda for so long that neither he nor his advisers have any excuse for failing to know the conditions attaching to all sales. Those basic errors are inexplicable after such a long gestation period.

I have an uneasy feeling that between the arrangement with the London merchant bank — which was not proceeded with in full — or the placing of shares with placees close to the Government stockbrokers — which are still not fully accounted for — from the present position would cause any reasonable observer to ask the most serious questions as to whether a false market has been created in regard to the shares. This is in addition to the problems which have arisen in relation to what the Stock Exchange rules describe as "connected persons".

From contacts with the Dublin market today, I am satisfied that there is unparalleled outrage among many of the investors who believe that, by paying the share price last Friday morning, they were plainly duped. People must answer questions in relation to that and the Minister is responsible for answering them and for the behaviour of people he appoints as his advisers. It is not good enough for the Minister to say he will await the report of the Stock Exchange. The Stock Exchange will report on this matter but the Minister is accountable and he cannot slide out from underneath it by waiting for reports from other agencies in this regard. The State has powers under the Companies Act to investigate such matters. There are other powers open to the State but I want to know what the Minister will do. The Government conferred responsibility on the Minister to deal with this matter in public trust. We do not want to hear what the Stock Exchange, or people outside the House are doing, we want to hear what the Minister will do in this regard.

This matter is of such import and gravity that it must be investigated using the fullest panoply of investigative procedures open to the State. I am convinced that the Minister for Finance has no other option but to give this matter top priority. I agree with Deputy Yates, my soundings indicate that the price of £2.75 per share will most likely, in any event, collapse under the weight of the revelations. The public, the taxpayers and the Exchequer are the losers. That is not a matter to be fobbed off by using terms such as business golden circles or blue chip companies outside this House. The Minister claimed credit in this area but now that the matter has come full circle the Minister must accept full responsibility.

To reassert some control and authority in this regard, the Minister must clarify whether the Government intends to recall its shareholding in Greencore and relieve those institutions who believe, in some instances, they paid over the odds last Friday because of the market price then prevailing. Will the Minister relieve those institutions of their burden in the light of the information now available? Will he deal with this as a matter of urgency so that the share trading in Greencore may resume at a reasonable level? It would allow a good Irish company, which was already damaged by policy failure, as Culliton suggested to link up with the market access, good technology and market intelligence of a foreign partner like ADM. The Minister failed the shareholders on that count and he has failed them again because of the advice given by his advisers and the lax attitude he displayed towards this issue. The Minister must do all in his power to ensure that a company which deserves much better from the Minister and his well heeled advisers, will obtain a better deal for its employers, employees and the public. There is an unwholesome stench from this whole affair which is not good for Irish business. The people involved must be named and rooted out in the public interest and that of proper conduct of public and business affairs.

The buck does not stop with the advisers. Less than 48 hours ago the Minister assured me that following a decision of the Government he was conferred with the authority to conclude discussions with ADM or, failing that, to place the shares with institutions. There is no point in the Minister seeking to walk away from that responsibility or to read a script with his head down and tell us he had not known of this matter. It is the Minister's job to know about such matters. The Minister has been operating in trust for the public. The Government stockbrokers were appointed on the authority of the Minister as he confirmed today. The Minister stated that he retained those people to advise him, those people have let the Minister down and, in turn, the Minister has let down the public, conclusions must be drawn from that.

From one sorry episode in this saga to the next, the Minister failed to protect the public interest and the common good. The buck stops with the Minister and he must account for his stewardship here today. What he has stated falls short of an acceptable mark for a stewardship that smacks of such gross incompetence as to border on the negligent in terms of the Minister's trust and duty.

Mr. Rabbitte:

I wish to make a few remarks about the politics of privatisation and who benefits, a subject not touched on so far. I also wish to make a few remarks about what this affair tells us about the conduct of Irish business and the standards which are applied. The Minister cannot claim that this is the first time since we started selling-off the family silver that we have cause for concern in respect of the State's dealings with stockbrokers. There were a number of such examples during the declining days of life under the Kinsealy regime which gave cause for concern in this House and which were discussed in this House. There was the famous letter revealed on a Sunday news programme by the Leader of my Party, Deputy De Rossa, where the principal in a major firm of stockbrokers in the city gave as a reason for seeking £2 million that he had the ear of people in high places and as a result won favours he might not otherwise have got. This is not the first time we have been confronted with this situation.

The Minister has to tell the House who made the decision to retain Davy Stockbrokers. How was that decision made? How can he explain the decision having been made, that there was apparently no contact between the day they were asked to handle the flotation and now? Despite the things we now know were happening and the knowledge at the disposal of Davy Stockbrokers, the Minister has asked us to believe that there was no contact between that date and now. The Minister's speech is not very helpful in this regard. Notwithstanding the notice he was given of this debate, it was hurriedly pieced together and different typists typed different paragraphs; it is a stitched together explanation that is not worthy of this House on a matter as serious as this.

Many Members of the House will remember the late John Kelly saying here that the AIB-ICI affair, where the State had to ride to the rescue in the machinations of a major financial institution, constitued a free kick for the Left. If that constitued a free kick for the Left, the Davy Stockbrokers-Greencore saga is a penalty try against Irish business, its practices and standards. It is a political nightmare for the Government and, in particular, the Minister for Finance. A significant indigenous Irish corporation, a rare enough feature of the Irish industrial landscape, has been damaged and our international credibility as a country with which one can do business has been put at risk. This raises fundamental questions about the conduct of Irish financial, commercial and business affairs.

This afternoon's explanation by Mr. Brian Davy is entirely implausible. He said that an overseas investor, a London merchant bank — which the Minister has now confirmed to be Warburg — was sought out by Davy Stockbrokers for the disposal of ten million shares and that was subsequently revoked in favour of placing the shares "with a number of placees close to us", Mr. Davy's words. This falls far short of the transparency required in this affair. Having sought out the overseas investor in the first place, why did the stockbrokers suddenly conclude that it would be "damaging to place so many shares not in firm hands", his words. It is simply not believable that the placing of shares with an overseas institution sought out by the stockbrokers in the first instance would be regarded by them as damaging, unsuitable or inappropriate. Mr. Davy's coy description of a "number of placees close to us" is even less satisfactory.

Who are these placees and precisely how close are they to Davy Stockbrokers? It is totally unacceptable at this late stage in the day for the Minister to come into the House and tell us that he still does not know the identity, or has not been told the identity, of these placees which are close to Davy Stockbrokers. To say that he retained a company of stockbrokers to handle this flotation in the State's name and he does not know, at this stage of the day, the placees close to that company seems to be utterly absured, unacceptable and a dereliction of duty.

Was IBI one of these placees close to us? Since it owns both IBI and Davy Stockbrokers 100 per cent, did the Bank of Ireland stand to benefit from this transaction? Did any senior staff in Davy Stockbrokers, associated with Davy Stockbrokers or associated with any company connected with Davy Stockbrokers, stand to benefit from this transaction? Because of the controversy surrounding the Greencore affair from day one, the dogs in the street were aware of the 15 per cent ceiling enshrined in the articles of association. Whatever the true reason for the unravelling of this deal, it most emphatically is not because it belatedly dawned on Davy Stockbrokers that the 15 per cent ceiling was there. I cannot believe that any Minister would sit behind his desk and accept that kind of lame, timid, manifestly implausible explanation from a company retained by him and his Department.

To put it mildly, the Minister for Finance has been dogged by bad luck on the Greencore affair from day one. His decision to sell off a valuable State stake in a major indigenous company deprived him of any strategic influence over the future direction of that company, its expansion and diversification. I remain convinced that this decision to sell for short term budgetary gain was the wrong decision. His subsequent surrender to the kneejerk response from the Labour back-benches — opposition, let it be said, not to the sale but to the nationality of the buyer — was a damaging decision which deprived Greencore, if one believes in privatisation, of the opportunity of linking up with a major international food company which would have given it market access, etc.

It is important to point out that in normal circumstances it would have been perfectly understandable for the Minister to rely on the professionals whom he employed to do this job. It is time for the mystery and secrecy which surrounds the machinations of the Stock Exchange and stockbrokers to be swept away by action of this House, if necessary.

Deputies:

Hear, hear.

Mr. Rabbitte:

The Minister would have been wiser to hand over the handling of the flotation to Deputy Upton and Deputy Kemmy who would have done a far better job for him. I am sure Deputy Bree would have ensured that the shares remained in Irish hands. After the Goodman, Greencore and Telecom affairs and the other scandals which haunted the twilight days of the Kinsealy regime, it is unthinkable that the tax compliant citizen must helplessly watch the parade of naked greed and deceit involved in this affair today. We must sit back and watch the naked greed and abuse of position which has been exposed in the case of the building societies. It seems that a Government which promised openness and change has presided over the sale of the State's assets in an inefficient manner. The Minister has not told us exactly the fee and other payments that Davy Stockbrokers might have expected to get had their hand not been forced in this affair.

There is an extraordinary paragraph in the Minister's speech which states:

I understand that they intend making this information available to the Stock Exchange also. In the case of Warburgs, there was originally an arrangement that the commission fee of £550,000 would be shared between them and Davy. Furthermore, Dávy would share any profits or losses arising from a shareholding that might pass to Warburgs in order to complete the placing. However, ultimately, when Warburgs 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's and that the fee to Warburgs would be reduced to £100,000.

What is the man in the street expected to make of that? Do I understand that these guys were conducting themselves as some kind of high class bookies' runners that were in for a share of the action? Is this the way business is conducted? The taxpayer is entitled to an answer. Whatever else has been said about the Minister for Finance — after serious damage has been done to a major company and to our international reputation — at least it can be said of him that he did not participate in any cover-up, that he called a stop to what was under way on the part of a company in whom confidence was reposed.

It is intolerable that this position should be allowed to continue. During and after this debate we still will not know the identity of the people who presumably were to benefit if this transaction had gone ahead, like so many other transactions that were accidentally flushed out. If there had not been a falling out among the reputable executives—I hesitate to use the term — that were entrusted with this company when it was in State hands we would never have known, but for the work of a certain journalist, what might have been covered up during the birth of Greencore. From that stage right up to the present there has been cause for concern about the handling of Greencore's affairs. Only recently they were engaged in spring cleaning preparatory to the flotation of the State's remaining shareholding.

The Minister, in his unabashed and engaging way, told this House only a few months ago that he did no even know they were intending to sell off this stake-holding. Despite all of these reasons for concern, there was no monitoring, no assessment or anything else of the handling of the flotation by the company concerned. It puts an entirely new light on the comments of some of these economists, posing as independent commentators, who go on public programmes and on the media arguing for privatisation.

An Leas-Cheann Comhairle:

Deputy Rabbitte has one minute remaining.

Mr. Rabbitte:

I regret that, Sir. At the next Whips' meeting I will support Deputy Yates' suggestion that we need longer.

It seems quite clear that those so-called independent commentators can very often have a vested interest. Any assessment undertaken of privatisation in Britain or here has shown that the big winners are the managers, those who purchase the shares, not the workers, not the country. It is short term, budgetary advantage for the Minister against the long term interest of dividend to the country.

Indeed, one really wonders about Irish business. It used to be said, in the wake of last year's scandals, that this was a very unfair image of Irish business, that this was the exception to the rule. I am now beginning to wonder what is the exception to the rule and what is the norm. It is not the first time in the history of the Irish Sugar Company that somebody entered into a joint venture which ended up shutting down the Irish company and making a fortune for himself on the international stage. One wonders whether that is under way again. One wonders whether one can repose any confidence in those charged with the future direction of Irish business.

It is a sad, sordid saga and the Minister has not told us the full story. The least people are entitled to as this deal unravels and the future of a major company is damaged and put at risk, is to be told who stood to benefit from these transactions, how this clandestine operation could have continued while the Minister participated in a programme on Friday last, praising and thanking Davy Stockbrokers for their handling of the affair. In this House on Tuesday he thanked them for the way they had handled it.

Does anybody in the Department of Finance, if the Minister himself does not have the time to do it, keep their finger on the button and mind the shop while the Minister is minding his constituency?

Minister for Finance (Mr. B. Ahern):

There were many questions asked. I take it that the arrangement still applies to have a question and answer session later, when many of them can be answered.

The statement I made at the outset of this debate was in keeping with everything I did in relation to the sale of these shares from the very beginning in that, at every opportunity, on every occasion, I informed the public, the taxpayer, of the position or gave information on where matters stood.

I will attempt to answer direct questions put to me. Deputy Rabbitte asked whether I had had contact with Davy Stockbrokers. Naturally I had; I discussed with them a number of times last week the timing, the day, the arrangements, how they, Davy Stockbrokers, would handle the issue. I discussed the matter at great length with them again yesterday when they informed me that there were aspects of the sale and placing about which difficulty was being experienced. Therefore, Members will realise that my statements today, on what I was aware of and was not aware of, were based on the outcome of those discussions. I want to make that absolutely clear.

Deputy Yates contended it had been ill-judged to go to the market so quickly after the flotation of Irish Life. The fact of the matter was that, on the day we went to the market with Irish Life, there was an over-demand for shares. We could have sold all of the Irish Life shares, and many more, on that occasion two weeks ago. It was the considered judgment of the market last week that it was the time to go. At 12 o'clock on the day, I was informed that of the order of 17 million to 20 million shares would be taken up, that Davy Stockbrokers had the arrangement, which would be the usual arrangement — I do not want to accuse Davy's in any way — that one would always endeavour to find a significant shareholder, somebody who would take a large placement, which is what they did. If, however, Warburgs were to take ten million shares, that would create the very circumstances we were endeavouring to change — in that the ten million shares comprised 40 per cent of the transactions, which was considered to be much too high. To put it absolutely clearly to the House: I was not told that they had moved from the ten million shares. When I asked a question late on Friday last I was informed that they had not got to use much of the Warburg take-up, which I was glad to hear because I did not want to see that being taken up.

I recognise that some Members present would not be familiar with what happens in such cases. One does not get the list straightaway of who takes up the shares; the contracts would not be completed for another ten days at least. It is when the contracts entered into have been completed one receives the full list.

To answer Deputy Cox's question as to the final break-up between the United Kingdom institutions and our domestic ones, I have still not received the list, but I will receive it shortly, of what I believe to be five companies directly associated with Davys which, when the shares did not go to Warburgs, went to those five companies. To the best of my knowledge, gleaned from the legal discussions which have been continuing all day, I believe these companies may not necessarily have had any kind of sweetheart arrangement. By that I mean that it was not a question of, if they lost, receiving comfort from Davys. I think the position was that they were directly linked to Davys. Both the Stock Exchange and I will examine that matter fully to get to the bottom of it.

Mr. Rabbitte:

Does it include the IBI?

Dáil Éireann díospóireacht - Thursday, 6 May 1993

Greencore Shares Placement: Statements.

Deputies:

Dáil Éireann díospóireacht -
Thursday, 6 May 1993