EBS could be demutualised within 12 months

EBS Building Society, which is now controlled by the state, could be demutualised with the next 12 months.

That will happen if the society reaches agreement with Cardinal Asset Management about a substantial investment in the society.

Such a move would spell the end of the mutual status of the business, with members ending up with nothing for their loyal support of the business since its foundation 75 years ago.

It would also mean that the 875 million capital pledged by the Government to the society would not have to be called upon.

In effect, it could save the state several hundred million euro depending on the terms of any potential new deal.

News of Cardinal’s interest was confirmed by the society in late April.

After the group’s annual general meeting in Dublin yesterday, chief executive Fergus Murphy said negotiations with Cardinal have been “very positive and are continuing”.

He said: “We’ll go into deeper discussions in the next month, and I think that next month will tell a lot in terms of where it goes after that.”

At this stage the talks “would have to be characterised as serious, ” he said.

Shareholders who turned up for the AGM at the Burlington Hotel in Dublin yesterday were in effect confronted with a done deal.

The EBS needs a total of 875m to meet the new stringent targets set by the Financial Regulator.

The state has provided 100m by taking new shares in the society, the government said in a statement ahead of the AGM.

The rest of the 775m has been made available in a promissory note which allows the EBS to draw down the funding over a long period at the rate of about 75m per annum.

Mr Murphy said the first draw down would happen shortly as the group moves to bring its core Tier 1 ratio up to 8% by the end of 2010.

EBS is due to submit a restructuring plan to the European Commission by the end of June.

Ironically, at the well attended AGM a number of shareholders spoke passionately about how important the mutuality was to them.

Under questioning chairman Philip Williamson told members the changes they faced at the AGM had been flagged at the Special General Meeting back in December, which they voted for overwhelmingly.

He told members who complained that they had been denied the right to vote on motions before the meeting that the AGM was a formality because Minister for Finance Brian Lenihan, with 51% of the equity, could vote through all resolutions.

One shareholder objected to the board membership of Cathal Magee, who was part on the credit committee and had earned over 300,000 in fees since joining the board in 2002. In another twist, Mr Magee, who is a former boss of Eircom, was appointed chief executive of the Health Service Executive yesterday.

Liam Purcell asked if the society was now free from the “contagion of Irish Nationwide” as a result of the move by the minister. The chair responded with a definite “yes”.

It has also emerged the EU does not favour mergers between institutions that have both been given state aid.