State recoups €1.3bn put into Irish Life with sale to Great-West Lifeco
Published 20/02/2013 | 04:00
THE country's largest life and pensions group has left state hands after it was sold to a Canadian firm for €1.3bn.
Great-West Lifeco, which owns Canada Life, agreed a deal with the Government to take over Irish Life, bringing to an end a sale process that had begun nearly two years ago.
The deal means that the State breaks even on the company. It took over Irish Life last year for €1.3bn as part of the bailout of its then owner Permanent TSB.
Under the terms of the agreement, Great-West will combine its Canada Life (Ireland) business with Irish Life under the Irish Life brand.
Canada Life's headquarters will now move to Irish Life's offices in Abbey Street, Dublin. The sale is expected to close by July.
While there will be job losses as part of the deal, Great-West's president and chief executive Allen Loney said any cuts would be voluntary. He declined to say how many staff would leave.
Unsurprisingly, Finance Minister Michael Noonan hailed the deal as a "historic transaction" for the State.
"There is a perception among the public and elsewhere that the banks and other companies that received state funds were something of a black hole, but this has proved that is not the case," he said.
The sale is also likely to please the troika – and the IMF in particular – who wanted the Government to sell assets, rather than buy more.
The IMF was particularly concerned about the Government's decision to take over the group in the first place.
The book value of Irish Life is thought to be closer to €1.7bn but Mr Noonan rejected any suggestion that the Government could have got more than €1.3bn for Irish Life.
"We aren't investment managers or run hedge funds," he said. "The policy is to take out what was put in at par without any further risk and we have done that."
Mr Loney said the transaction "affirms our commitment to Ireland".
Canada Life has been here since 1903 and is the biggest employer from Canada in the Republic.
Mr Loney had earlier referred to the "attractive price" for which Irish Life was available but also noted the recovery in Ireland since Great-West pulled out of sale talks 14 months ago.
"At that point it was looking likely the euro would disintegrate and there was no way we could wisely go forward with a deal," he said.
"Now though, the change has been transformational and Ireland in particular has been a beacon to the world (in terms of recovery)." Irish Life is expected to add about 10pc to Great-West's earnings," he added.
With Irish Life the first financial institution to leave state hands, Mr Noonan said he would now look at offloading the convertible bonds that the Government holds in AIB and its preference shares in AIB and Bank of Ireland.
However, he said there was no timeline for such a move.
Meanwhile, hedge fund manager and Irish Life board member Piotr Skoczylas has taken legal action to block the sale.
Shareholders of Irish Life's holding company, Irish Life and Permanent Group Holdings plc – including Mr Skoczylas – want the sale blocked. Those shareholders were diluted when the Government injected €2.7bn into the company two years ago.
The legal action was apparently taken on the understanding that the deal was to close yesterday. But as it will not now close until July Mr Skoczylas has accepted that the immediacy of an injunction is no longer there.