Sale to Great-West most risk-free option

The sale of Irish Life had been well flagged but, nonetheless, adds to the positive news flow over recent months. Whether it is a good deal for the Irish taxpayers depends on which way you look at it.

The Government paid €1.3bn for the company roughly this time last year, so the sale to Great-West Lifeco, the parent of Canada Life, for that amount means no loss to the taxpayer. This is the second attempt at selling Irish Life to the same company. The original deal collapsed in November 2011.

The Canadian financial services giant pulled out at the 11th hour amid concerns that Ireland could default on its sovereign debt obligations, or the euro would collapse. Obviously these concerns have now been put to bed, which is good news for the wider economy. After all, the country needs much foreign investment to get the economy moving again.

The deal is good news for existing and potential Irish Life customers because it now has the financial underpinning of a much larger and financially robust organisation. The merger of Canada Life and Irish Life means that there is a very strong player in the Irish market. The downside is that there are obviously concerns about competition and product options for customers.

But could the Government have held out for a better price for the taxpayer? After all, €1.3bn is the same price tag that it was looking for when the deal fell through 14 months ago. The country’s prospects have improved substantially over the intervening period.

Irish Life is a lucrative asset on the basis that it is a play on an Irish economic recovery.

The Government’s strategy over the past few years has been to under-promise and over-deliver. It is a strategy that has served it well as the State has met all of its bailout targets with aplomb. Investor confidence has steadily returned.

It is believed that one of the Government’s advisers wanted to offload Irish Life through an initial public offering (IPO). If it had been a success then it probably would have generated more for the exchequer than €1.3bn. But in the current environment, an IPO would have been a high-risk strategy.

It is also believed that the Government wanted about four or five serious bidders as part of a trade sale. The problem with this approach is that because of complex Basel III banking regulations, most financial institutions are selling assets rather than buying. In the end, a sale to Great-West was the most risk-free option.

Irish Life is the first sale in the current series of State-owed asset disposals. The priority was to divest it in a seamless manner as possible. There will be plenty of more State assets coming on the block soon.