JC FLOWERS, one of four bidders for the EBS, confirmed yesterday it is to take a 49 per cent stake in one of Britain’s oldest building societies, increasing speculation that the US private equity firm is emerging as a serious contender as a suitor for the EBS.
David Morgan, JC Flowers’ managing director for Europe and Asia Pacific told analysts yesterday the company is interested in financial services investments in Ireland, amid reports that the company retained JP Morgan Chase as part of its bid for the building society.
JC Flowers is one of three private equity firms that have indicated an interest in the EBS. It is believed that British private equity firm, Doughty Hanson, which owns TV3, and Cardinal Asset Management, a firm led by Dublin executives Nick Corcoran and Nigel McDermott and which is backed by Carlyle Group, are all due to submit bids by next Monday. Irish Life Permanent is the fourth interested party. JC Flowers had been working on an investment bid with Cardinal Asset Management, but is now submitting its own bid.
Kent Reliance is one of Britain’s oldest mutual societies and the country’s 12th largest building society.
The mutual said the deal with JC Flowers provided the society with “substantial new capital investment to support the business that can allow the society’s members to remain members of a mutual organisation”. Under the deal JC Flowers will inject £50 million (€60 million) into the building society. Kent Reliance will transfer its business, assets and liabilities to a new bank, in which JC Flowers will own a 49 per cent stake.
The deal is being viewed as a potentially transformative partnership which could change the future shape of the building society structure.
JC Flowers is run by former Goldman Sachs Group banker Christopher Flowers. A private equity company focused on investments in the financial services sectors, it has a history of investing in distressed financial institutions. It was a potential buyer of Northern Rock before the bank was nationalised in 2008, and was also tangentially involved in a short-lived speculative bid for Bank of Ireland in 2008.
It is understood that the company is keen to gain a foothold in the British and Irish banking markets.
Any deal between EBS and a private equity firm would involve a co-investment by the Government. The Department of Finance has indicated that it was keen for the institution to secure private investment.
The EBS needs €785 million to meet the core equity ratio of 7 per cent set by the Financial Regulator. The State has already injected €350 million into the EBS and has pledged to fund its fall if private investment is not forthcoming.
