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Billionaire investor Wilbur Ross had previously made a bid for EBS, an Irish building society, which needed a large regulatory capital injection at the time. Watsa, McMorrow and Ross then set about finding other long-term value investors to embark on the Bank of Ireland project. This led to Fidelity and Capital joining the fray.
The five investors met with Bank of Ireland management a few weeks ago for due diligence reasons but the clincher for Watsa was Richie Boucher, Bank of Ireland’s CEO. Watsa sees the Bank of Ireland stake as a long-term investment based upon an appropriately capitalized bank to deal with stress tests.
Another attractive factor cited was the fact that the Irish government is working hard to secure both the economy and the banks. Ross states that Ireland’s economy will come back in time as there is a young, growing population, low corporate tax rates and a favorable trade balance.
The deal has saved the bank from nationalization and will see the Irish government's Bank of Ireland holding half to 15%. The total investment, from the consortium, was for a 34.9% stake in the bank with Watsa and Ross taking a 9% stake each. The price paid has not been disclosed.
Diclosure: None
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