First Active shareholders in line for bonanza, but jobs on the line
The majority of investors saw the value of their personal shareholding in First Active rise to more than 6,000 euro yesterday as Royal Bank of Scotland bid €6.20 per share for the Irish mortgage lender.
The bid will prove bad news for workers, with job losses inevitable if the bid is accepted. While the Irish Bank Officials Association (IBOA) said it would fight any redundancies, the Royal Bank of Scotland said jobs losses would be “in the low hundreds”.
The biggest winners, if the sale goes ahead, are: chairman John Callaghan who will net €1m; chief executive Cormac McCarthy and finance director Michael Torpey, who will each get approximately €250,000.
The total value to investors in First Active has risen from €2.68 per share to €6.20 per share over the five year period since the former building society demutualised.
Consumers Association finance spokesman Eddie Hobbs said the move “will not make an iota of difference” to competition in the Irish banking market. Electronic transfer of accounts from bank to bank is not available here and the money transmission system is tied up by the major banks. “Until those key issues are tackled by the government, consumers are dreaming if they think the purchase of First Active is going to shake up the Irish banking sector,” he said.
Royal Bank of Scotland’s bid values First Active at €887m, of which roughly 75% is controlled by ordinary shareholders. Since most of the shares were given free to investors, the total gain to shareholders is estimated at close to 700m out of the total bid of €887m.
This windfall is seen as a welcome reversal of fortunes for ordinary investors who saw one third of their eircom investment wiped off by the stock market collapse of recent years. However, it is bad news for workers. IBOA general secretary Larry Broderick yesterday insisted there could be no compulsory redundancies.
"IBOA members were astounded to hear vague talk of job losses emanating as a result of Royal Bank of Scotland's bid for First Active. In a financial institution as large and profitable as Royal Bank of Scotland, there is simply no business rationale for any compulsory redundancies. IBOA will ensure that member's jobs, terms and conditions and future security are protected.
"IBOA and Ulster Bank recently signed a co-operative agreement and we are anxious to ensure that any discussions and negotiations on this issue are in line with the principles agreed in the co-operative agreement.”
