IFG shareholders must be getting weary with the ever-changing messages coming from management as well as contending with the group’s problematic legacy issues.
In February, the Dublin-headquartered financial services business issued an update applauding itself for the “good progress” being made on its strategy of developing its “two” businesses, James Hay and Saunderson House.
But it then went on to say “greater value for shareholders may be created by a sale of Saunderson House”.
So far, so unclear. Nevertheless, shareholders reacted relatively positively. Shares in the company recovered as shareholders came round to the news that Saunderson House – considered by analysts to be a gem of the business – would be sold.
Not so, however. Two months after the original announcement, IFG decided on Tuesday that Saunderson House was not for selling after all.
Having received non-binding offers for the business, IFG felt its suitors offers weren’t “wholly aligned with the strategy” of the business and would present “execution risks”. That’s as clear an explanation as shareholders were going to get.
Cantillon's sources suggest that the spectacular U-turn was most likely due to any offer for Saunderson House being conditional on the hitting certain targets. IFG might not have got the full consideration for the business for a number of years, if at all. And if key people were to leave the group in the meantime as a result of the uncertainty created by the unexpected shift in strategy, hitting those targets may be further compromised.
Important asset
For whatever reason, management has reconsidered and now sees Saunderson House as an important asset that will create just as much value under the ownership of IFG – even with the exposure to up to €20 million in legacy claims from an investigation by the British revenue.
Cantillon has no reason to doubt that, but shareholders will no doubt be aware that that if the exposure is anywhere above £3 million, IFG may well have to take on debt.
Whatever the case, calling it “strategy” seems a bit of a stretch. And an absence of strategy ultimately leaves shareholders in the dark.
