Sign of the times as Fexco snaps up Goodbody for €24m
AIB has sold Goodbody Stockbrokers to Kerry-based Fexco for just €24m in cash.
But sources say the full cost will be higher because Fexco must provide cash to cover Goodbody's capital reserves requirements, as well as pay AIB for the business.
That cost could be set to rise, with the Financial Regulator preparing to revise upwards the amount of capital stockbrokers must hold in reserve to meet potential losses.
A spokesperson for the regulator refused to comment on the Goodbody deal but said changes in how regulatory capital requirement for stockbrokers is calculated are coming.
"We expect stockbrokers to hold a substantial buffer over the regulatory minimum capital requirement to reflect more difficult trading conditions."
Even so, at €24m in cash for a nationally established finance brand, the deal is a sign of the times for Dublin's pinstriped financiers. One of Goodbody's main rivals, Davy, was sold for €350m in 2006. Goodbody was founded in 1877 and is Ireland's oldest stockbroking firm, while Killorglin-based Fexco was founded in 1981.
Fexco's operations range from currency exchange to outsourcing business services and a small stockbroking business. The privately owned firm has 910 employees in Ireland, and 1,300 in total. In 2008 it generated €191m in revenue, with operating profits of just under €20m.
Under the terms, AIB may be able to claw back some cash from the Goodbody sale if Fexco sells the business, or part of it, in the next three years.
On the other hand, AIB is understood to have provided some indemnification to Fexco against future litigation. That reflects fears that cases could be brought against Goodbody for advice given to customers while it was under AIB ownership.
A source said the agreement on indemnification was in line with what is normal in such a transaction. The acquisition is subject to regulatory approval but is expected to complete within three to six months, sources said.