Leading Davy shareholders to gain €185m as Bank of Ireland buys bulk of scandal-ridden firm

BoI — which is 14% owned by the Government — will buy Davy's wealth management business and capital markets division

Ireland’s largest stockbroker was hit with a record fine of €4.1m in March for failing to supervise a consortium of its employees in their dealings in the sale of Anglo Irish bonds. File photo: Sasko Lazarov/RollingNews

A group of five leading shareholders who once held senior positions at Davy are set to reap a combined €185m under a deal that involves Bank of Ireland buying most of the scandal-ridden broker.

Ireland’s largest stockbroker was plunged into crisis in early March when the Central Bank slapped it with a record €4.1m fine after a multi-year investigation found Davy failed to supervise a consortium of 16 of its own employees in their dealings in the sale of Anglo Irish bonds for a client, in late 2014.

The controversy marked a further stain on the financial services industry here.

Bank of Ireland to pay €440m

Under the sale, Bank of Ireland — in which the Government owns a 14% stake — will buy back the bulk of the broker it originally owned 15 years ago by paying €440m for the wealth management business and its capital markets division.

The sale also involves the disposals of the Davy Global Fund Management unit and a stake in a small investment fund to two separate buyers, for up to €125m.

Davy had appeared at first to downplay the seriousness of the scandal but a political and public outcry led to the departure of a remaining trio of Davy’s largest shareholder-executives in March.

The Government’s NTMA stripped Davy from its lucrative roster of dealers selling Irish sovereign bonds and, within days of the Central Bank fine, the firm had put itself up for sale.

Five shareholders to gain €185m 

Five shareholders who long held senior positions at the firm will in time likely gain €185m between them.

They include the single largest shareholder and former chief executive Brian McKiernan who, along with non-executive director and deputy chairman Kyran McLaughlin, and head of bonds Barry Nangle, left in March. Of other leading shareholders, former CEO Tony Garry had left in 2015, while senior executive David Smith departed in 2016.

'Business sold for better than expected price'

Niamh Brennan, professor at the UCD Centre for Corporate Governance, said the large shareholders hadn’t suffered any monetary cost because, despite the scandal, the business was sold for a better than expected price.

Davy again apologised “unreservedly” for its failures. Finance Minister Paschal Donohoe said the sale of the bulk of the firm to Bank of Ireland will bring “certainty”.

There was no change to Government policy on top bankers’ pay under the deal, he said.