IL&P bosses plan move to insurance unit in IPO
Flotation of life arm comes as Permanent TSB seeks multi-billion euro bailout from State
Published 02/04/2011 | 05:00
IRISH Life & Permanent's most senior managers are set to move over to the life insurance business and steward its upcoming stock market flotation, the Irish Independent has learned.
The news comes the day after the Government announced that IL&P's Permanent TSB bank needs a multi-billion euro bailout, triggering plans to sell off the life company to help foot the bill.
Shares in IL&P collapsed as much as 60pc amid heavy trading yesterday, as investors in the plc faced the prospect of ceding more than 90pc of their slimmed-down company to the State.
The smaller company will also lose its top bosses since IL&P group chief executive Kevin Murphy, group finance boss David McCarthy and a number of other key executives, look set to lead the life insurance flotation.
However, well-placed sources insisted there was "no chance" that senior executives and staff would get the kind of share options often associated with initial public offerings (IPOs).
"It's not that kind of IPO," one source said. "The aim of all of this is raise as much money as we can to reduce the burden on the taxpayer."
The life insurance company has an embedded value of about €1.6bn and could be expect to raise close to this when it's floated later in the summer.
Sources yesterday said IL&P had already had "a lot of interest" in the IPO, despite difficult market conditions. "Put it this way, we wouldn't have gone down this route if we didn't think we could do it," one said.
IL&P bosses are believed to be well disposed to a structure that would give existing investors in the company preferential treatment in the IPO, but sources stressed that would be dependent on permission from the Government, which might not be forthcoming.
Under the proposed deal, there will be no change to IL&P's 30pc stake in Allianz's Ireland and Northern Ireland businesses, because that stake is part of the life insurance arm.
The group's assets management division will also remain intact, as part of the life insurance business, and plans to buy AIB's investment management business are powering ahead.
Sources confirmed that the life insurance company will be floated with its full contingent of capital -- some €700m above regulatory minimums -- in the hopes of extracting maximum value from the IPO.
Even if the IPO raises €1.6bn, just €1.1bn will be knocked off the €4bn capital target for IL&P, since there is some overlap bet-ween the capital of the life insu-rance company and the bank.
That would mean that the bank/plc would need another €2.9bn of state support, dwarfing its current market capitalisation of less than €50m and leading to a near-total wipeout for existing shareholders.
IL&P management will also be badly hit by the crash; the company's latest annual report shows Mr Murphy owns some 137,966 shares, Mr McCarthy owns 39,479 and outgoing chairperson Gillian Bowler owns 30,259.
Last October, Mr Murphy's shares would have been worth almost €230,000, last night they were worth about €23,500, by the summer, they could be virtually worthless.