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Friday 19 September 2014

How US billionaire made €560m killing on Bank of Ireland

'Vulture' investor to quit bank board after selling €290m stake for €850m

Published 10/06/2014 | 08:00

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Billionaire Wilbur Ross. Picture credit Mark Condren
Billionaire Wilbur Ross. Picture credit Mark Condren

US billionaire Wilbur Ross is set to pocket more than half a billion euro in profits after putting his entire remaining stake in Bank of Ireland (BoI) up for sale.

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The Wall Street veteran has almost tripled his original €290m investment in just three years.

"This has been a terrific investment for us and our investors expect us periodically to repatriate gains to them," Mr Ross told the Irish Independent last night when asked why he was selling now.

He confirmed that he is selling his 5.5pc stake in the bank in a deal expected to raise between €468m and €495m.

The shares will be sold through Deutsche Bank at a price expected to come in the 26 cents to 27.5 cents each range.

The upcoming European stress tests "were not a factor" in the timing or the decision to sell, he said.

Mr Ross told the Irish Independent last night that he will stand down as a director of the bank, blaming a European Commission ruling that bars directors sitting on the board of more than three banks. He has recently taken a stake in Greek lender Eurobank.

Just last March Mr Ross raised €345m with an earlier sale of 1.1 billion of the bank's shares at 33 cents each.

The combined March and June share sales will bring in between €830m and €850m for Mr Ross and his investors – a profit of up to €560m in three years.

He originally bought into BoI shares at 10 cent each in July 2011 as part of a bigger deal that saw five US and Canadian firms, including Wilbur Ross and Prem Watsa's Fairfax Group, take a combined 35pc holding and which effectively kept the lender from being nationalised.

Kennedy Wilson, another of the original group of five, took a much smaller stake under the 2011 deal and is already understood to have sold its shares.

Until March this year, Mr Ross was the biggest single private investor in BoI, owning more than 2.9 billion shares, or 9.1pc of the bank.

His spectacular profits mask the reality that Bank of Ireland was far from a sure bet and for much of 2011 and 2012 Mr Ross and his fellow investors were sitting on trading losses.

Yesterday Deutsche Bank confirmed it was selling Mr Ross's remaining shares in a deal that caught many in the market unawares.

"He was expected to reduce the stake but it's a bit of a shock to see him coming off the share register entirely," said Ciaran Callaghan, an analyst at Merrion Capital. It's the fact that it is so total which is the shock," Mr Callaghan said.

Pressure

After a dramatic rise last year BoI's share price has been under pressure in recent months.

Shares had recently peaked at close to 40 cents just before Mr Ross and Prem Watsa announced their stock sale in March and have been in steady decline since.

Shares closed at 28.4 cents each yesterday but are likely to come under pressure this morning given the discount expected on the latest disposal.

The latest huge windfall for a so-called "vulture fund" or distressed investor will reopen a debate about whether the Government allowed BoI to be sold too cheaply in 2011.

Questions will also be raised about whether the Government here has been caught off guard by the wily Wall Street tycoon.

The State's 14pc stake in the bank was valued at €1.75bn when shares hit 39 cents on February 28.

At yesterday's closing price that stake was valued €1.28bn, a huge decline in little over three months.

BoI returned to profit in the first three months of this year for the first time since 2008.

In July 2011, when Mr Ross took a stake in the bank, the financial crisis was at its height.

Ireland had been forced into the EU/IMF bailout just months before and fears for the future of the euro were running high.

Most investors were pulling out of Ireland over concerns that as yet undiscovered financial holes lurked on the balance sheets of all the main banks.

Last night BoI chairman Archie Kane thanked Mr Ross for his contribution as a director of the bank.

"On behalf of the Board I would like to thank Wilbur for his contribution, diligence and commitment as a Board member. Wilbur was instrumental in the success of the 2011 capital raising and, throughout his tenure, we have benefited greatly from his insights."

Irish Independent

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