Business Irish

Saturday 20 September 2014

How two billionaires made huge killing on BoI shares

Published 05/03/2014 | 02:30

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03/03/2014 Group Chief Executive Richie Boucher during Bank of Ireland Groups annual results for year ended 31 December 2013 at Bank of Ireland Head Office, Mespil Road, Dublin. Photo: Gareth Chaney Collins
Richie Boucher

TWO billionaire investors have pulled off the deal of the century after tripling their money following an audacious bet on Bank of Ireland shares.

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US-based Wilbur Ross and Canada's Prem Watsa slashed their stake in the Irish bank by a third yesterday, selling a 6.4pc holding for around €690m.

It's more than the €600m the pair paid for three times that size of shareholding in 2011 – and leaves them with a 12pc stake in Bank of Ireland that is worth a cool €1.2bn based on yesterday's trading price.

Shares bought for 10 cents each in 2011 were sold for just under 33 cents in yesterday's deal.

The huge windfall for the investors is likely to spark debate about whether the Government here allowed Bank of Ireland to be sold too cheap in 2011.

Seeing successful investors cut their stake will also prompt speculation that the time may be ripe for Finance Minister Michael Noonan to sell some of the taxpayers' 14pc stake in the bank – which has also tripled in value since 2011.

Yesterday's deal came about after "an inbound inquiry" from Deutsche Bank, not because he was looking to sell, US-based Wilbur Ross told the Irish Independent.

"We simply responded to an inbound inquiry from Deutsche Bank. We are happy to retain about two-thirds of our shares and have no present intention to sell any more," Mr Ross said.

He is "totally supportive" of the bank's strategy and tactics and will continue to be active on the board, he said.

Deutsche Bank sold the stake on to so-called "institutional investors", the kind of pension funds and insurance companies once seen as natural bank investors.

"Bank of Ireland has been one of our most successful investments," Prem Watsa said yesterday.

Mr Ross has been a director of Bank of Ireland since June 2012. Before yesterday's deal he was the biggest private sector shareholder in Bank of Ireland, owning around 9pc of the bank.

'Forbes Magazine' estimates Wilbur Ross' wealth at €2bn.

Lower profile Prem Watsa is though to be worth even more. His Fairfax Financial owned a slightly smaller stake and is the bank's second biggest shareholder. At one stage he was also a director of the bank, but since last year he has been represented on the bank board by non executive director Bradley Martin.

In 2011 the duo were part of a five-strong group of North American investors who spent €1.1bn buying 35pc of Bank of Ireland in what was seen as one of the most daring transactions ever.

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Other investors were Fidelity, the Capital Group and Kennedy Wilson, which took a smaller stake than the others but is credited with putting the whole thing together. Kennedy Wilson is understood to have already sold its Bank of Ireland stake.

The 2011 deal was done at the height of the financial crisis, just months after Ireland was forced into the EU/IMF bailout. At the time, fears for the future of the euro were running high, and most investors were pulling out of Ireland – including on concerns as yet undiscovered financial holes lurked on the balance sheets of all the main banks.

Fairfax said yesterday that it has no plans to cuts its stake further. Its decision to sell shares was driven in part because the Bank of Ireland shares are now worth so much that the investor needed to "rebalance" its portfolio.

BoI shares tumbled 10pc yesterday.

Yesterday chief executive Richie Boucher said the bank had returned to profit in the first two months of the year.

Irish Independent

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