Goodbody eyes dividend or MBO after failed sale

Moves short of sale could get cash to shareholders including Fexco and the firm's senior stockbrokers

Roy Barrett. Photo: Sportsfile

Donal O'Donovan Twitter Email

July 18 2020 02:30 AM

Goodbody Stockbrokers will consider options including a potential management-led buyout, payment of a special dividend or a minority stake sale after a second attempt to sell the firm collapsed a week ago, the Irish Independent understands.

Neither Goodbody nor 51pc owners Fexco is understood to have yet initiated any firm course of action since confirming that Bank of China had pulled its €155m takeover offer last week.

No approach has so far been made to or by the underbidders to Bank of China in last year's auction, who included Davy Stockbrokers and Irish Life, it is understood.

The Irish Independent understands that a number of options to create a so-called 'liquidity event' are now being considered, while the business also remains in play as a takeover target.

Both Goodbody and Fexco declined to comment.

A liquidity event could allow the business to return cash to shareholders including Fexco and around 100 senior Goodbody staff who own the other 49pc stake. Staff took the unusual step of not taking bonuses last year while the Bank of China deal was in the works.

Their stake would have generated an initial windfall of around €60m with the potential for a future earn out if the Chinese deal had closed.

Goodbody management, led by Roy Barrett, stressed that the company was not under pressure to sell when it announced that the Bank of China deal had fallen through last week, citing cash it still holds since the 2018 sale of the Irish Stock Exchange. Goodbody received €46m for its share of the stock exchange.

"Goodbody's balance sheet was substantially strengthened following the sale of the company's stake in the Irish Stock Exchange in 2018 and the company retains significant financial capacity to drive its growth strategy forward," the company said.

While paying out cash in a dividend might help retain and motivate staff it would not address the issues that prompted the broker's sale in the first place.

Fexco is understood to remain focused on exiting its investment. While the Killorglin, Co Kerry-based business is under no financial pressure to sell, its day-to-day business of foreign exchange has been hit by the drop in tourism and travel caused by Covid-19.

That has forced Fexco to reduce job numbers and temporarily cut pay and it is likely to absorb huge management resources this year at the McCarthy family-owned business.

While Goodbody is big by Irish standards, it is small relative to European and UK rivals and that is increasingly a disadvantage because costs in the sector - notably for regulation and technology - have risen.

All Irish financial services companies have also faced increased competition for staff in the wake of Brexit as large global firms including Barclays and Bank of America have located operations here.