Friday 9 December 2016

Buyers kicking the tyres as Ireland forced to sell off the family silver

Siobhan Creaton

Published 22/09/2011 | 05:00

Executives from Florida-based private equity group Levine Leichtman were spotted around Dublin this week as they joined the posse of financiers casting around to see what might be for sale in Ireland.

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They follow a long list of prospective buyers and their advisers who are all on the hunt for a good deal -- and Ireland is certainly the place to focus at the moment.

Any corporate finance specialist worth their salt has been to Dublin in the past 18 months and will have visited the Department of Finance, Communications, the National Asset Management Agency (NAMA) and other corridors of power, where decisions about what might be for sale are taken.

And now that the Government has decided to sell around 30pc of the ESB and to put its Aer Lingus stake on the market with an eye to selling others, there are certainly some big deals to be done.

Raising €2bn

The Government is looking to raise at least €2bn from the sale of valuable state assets and has started discussions with the EU and the IMF about putting this money into stimulating economic growth and job creation here.

Other companies that are likely to be put on the block as part of this process include Bord Gais, the National Lottery and even the state forestry company Coillte.

Corporate dealmakers from Boston to Berlin will long have run the rule over all of these companies.

They will have calculated the cheapest price they might be bought for and how long it would take for their buyers to make a handsome profit.

It's an exercise that is also being carried out on state assets in Greece, Portugal, Italy and Spain as the euro debt crisis forces these countries to take difficult and unpopular decisions that will have lasting consequences for each of these economies.

The Spanish government this week kicked off the sale of 30pc of its state-owned lottery company by launching the country's biggest stock market share sales.

It hopes to raise between €6bn and €9bn within the next month, although it is a difficult time to go to the stock markets seeking cash from investors.

Some commentators there are saying the sale smacks of desperation, with one likening it to selling the family's luxury Aston Martin car for €2,000 just to pay off a tiny amount of the mortgage.

The bitter experience of the sale of Eircom will make many fearful for the future here, particularly as assets that are strategic are being offered to international investors.

So far the Government has insisted this process will not force it to relinquish control of companies like the ESB.

Speaking in the Dail, Pat Rabbitte said the State must continue to have a strong and direct presence in generation, networks and supply and that any deal must be done in a way that ensures Ireland will remain a competitive economy.

And so, some time next year, Mr Rabbitte hopes to welcome one of Europe's biggest energy companies to the ESB and take a cheque for more than €1bn in the process.

But just how much money the State can raise will depend on how the deal is structured.

The minister says he doesn't want to see a scenario where Ireland would be unduly dependent on foreign-owned energy companies, particularly when the country would only be a small part of their overall operations.

It's all about "extracting value" and these deals must meet the simple test that they are in the public interest, he said.

Bord Gais is seen by analysts as an easier state company to part with as it is not as strategically linked to the economy as the ESB.

If the company was sold in its entirety the Government could hope to get up to €1.5bn depending on the level of buyer interest.

Energy companies

Selling the Aer Lingus stake is small beer beside the two energy companies, with a likely price tag of around €100m, and any deal here is dependent on fixing the company's almost €400m pension-fund deficit.

There are also concerns about ensuring that Ireland, as a small island on the edge of Europe, maintains good air access in the future so any deal would have to be carefully crafted.

We have seen how the pressure to accelerate the sale of its state assets ratcheted up on Greece this week in the struggle to bring its public finances under control.

If Ireland wavers in meeting its targets, the same thing could happen here. Finance Minister Michael Noonan will be meeting senior IMF officials later this week to keep them briefed on Ireland's progress and the plans it is implementing to meet its bailout conditions.

News that it is moving ahead to find a buyer for up to 30pc of the ESB will be well received in Washington.

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