Deal a bonanza for loyal investors

THE bid by Royal Bank of Scotland of €6.20 per share for First Active has sparked one of the biggest bonanzas for investors in this country in a long time.

Hundreds of thousands lost their shirts on the eircom flotation but the First Active process has been a gravy train for investors from day one.

When the building society converted to a public company in September 1998 the majority of the members got shares worth €2,574. That is based on 990 shares per member, based on two entitlements plus loyalty shares.

The RBOS offer has shoved up the individual value of the share tranches to €6,138, an increase of 138% on the flotation value of the group, which was €2.86 per share.

When the additional €1.12 per share capital pay-out last June is included it means that the value of shareholders investments has gone up by 156% since the day of flotation, said First Active chief executive, Cormac McCarthy.

The First Active deal has been a tremendous bonanza for former members of the First Active Building Society.

By comparison with eircom, where investors lost about one-third of their money, thousands of stakeholders in First Active have had to do nothing more than accept their entitlements as former members of the building society and watch their windfalls grow.

Small shareholders still account for 76% of the equity in the company and they are expected to vote enthusiastically for the package on offer from the world’s fifth largest bank.

Like former Irish Permanent Building Society members, First Active investors have also come out on top.

On an individual basis, however, the cat who really got the cream yesterday is current chairman John Callaghan, whose stake in the business will net him a €1 million.

The chairman of the former building society holds 163,000 shares, putting him in line for the biggest pay-out of the lot.

The deal has to be approved by shareholders and the High Court.

Welcoming the deal this morning, Callaghan said that the board is “delighted to recommend it”.

The offer of €6.20 per share - valuing First Active at €887m - represents a premium of 33% to its closing price last Friday.

Cormac McCarthy, who holds 37,000 shares, will earn €231,260 from the deal, and finance director Michael Torpey, with 41,000 shares, will get €254,200.

The majority of First Active shareholders will receive less than €6,200 from the deal, although this will be their second pay out this year.