AIB in $40m suit over Bulgarian bank stake
Published 02/09/2011 | 05:00
Allied Irish Banks is being sued in the United States for an estimated $40m (€28m) on its disastrous 2008 acquisition of a near 50pc stake in Bulgarian American Credit Bank (BACB).
Gramercy Emerging Markets Fund, which amassed almost 26pc holding in BACB prior to AIB coming on board, has alleged the Irish bank had a mandatory obligation under Bulgarian law to offer to buy Gramercy's stake once it entered into an agreement to become a shareholder in BACB.
Gramercy claims AIB and BACB's co-founder -- the US government-sponsored Bulgarian American Enterprise Fund (BAEF) -- conspired to engineer AIB's purchase contract so as to avoid making the offer.
The Gramercy Fund says as a result it has suffered losses of at least $40m. AIB sold its stake in BACB in May for just €100,000, having paid €216m for it. BAEF is headquartered in Chicago and is also being sued.
Gramercy's alleges that at the time AIB acquired its stake, Bulgarian law stipulated an individual or entity purchasing majority control of a publicly traded company was required to make a tender offer to all minority shareholders.
"AIB, in conspiracy with BAEF, structured its purchase of BACB shares in such a way as to attempt to avoid the mandatory offer while exercising de facto majority control over BACB," court documents allege.
Gramercy alleges that in April 2008, the president of Gramercy Advisors wrote to then AIB chairman Dermot Gleeson informing him that it was his understanding the Irish bank would have to offer to buy the Gramercy stake. Mr Gleeson "summarily rejected" those claims, it's alleged.
AIB said it was aware of the case and would be defending it.