The Commission of Investigation report into the contentious sale of Siteserv to businessman Denis O’Brien a decade ago has dismissed allegations of insider share trading in the company before the announcement of a deal that was jointly managed by Davy.
“There is no evidence that any unusual trading in Siteserv shares occurred which would give rise to an inference that inside information was improperly provided to or used by any persons,” Mr Justice Brian Cregan, the sole member of the commission, said in his final report on the matter, published on Wednesday.
Catherine Murphy, joint leader of the Social Democrats, claimed in the Dáil in 2015 that insider trading took place after Davy advised the then insolvent Siteserv in 2011 that shareholders should receive a €5 million payout to secure their backing for the sale of the business to Mr O’Brien company, Millington, for €45.4 million. It was first reported in July 2012 that Siteserv was on the market. KPMG was the joint corporate adviser on the sale.
The report said that Davy, on December 15th, 2011, proposed the shareholder payment to Siteserv and its lender, Irish Bank Resolution Corporation (IBRC), based on the stock’s 12-month average price until then. IBRC would end up writing off €118 million of the company’s €150 million debt as part of the transaction.
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In November 2011, some 3.2 million Siteserv shares changed hands — 53 times what was traded the previous month and 1.5 times the figure for the first 10 months of that year. However, the commission found that 90 per cent of the trading volume in November related to Davy staff moving existing investments from their personal accounts into their pension accounts and “not trades in the usual sense of a buyer and a seller”.
Davy advisers Des Carville and Nicholas O’Gorman, who were advising Siteserv on the planned sale, checked out what was behind the spike in activity with the trading desk and were informed of the pension fund transfers, the report said. It prompted Mr Carville to note to his colleague that it was “tax planning time of year!”, an apparent reference to the favourable tax treatment of pension investments.
The report also outlines standard Irish Stock Exchange enquiries into what was behind a series of volatile price movements and trading volumes in Siteserv shares before and after the sale was announced on March 16th, 2012. Nothing suspicious was identified by the exchange in relation to them, it said.
Looking into the €5 million shareholder payment, the commission noted that KPMG, which was hired by Siteserv in March 2010 to advise on financing options, and PwC, advisers to IBRC, had each concluded that shareholders might need a small incentive to approve the deal.
The prevailing view was that alternative routes for IBRC to get some of its money back, either through receivership, liquidation or examinership, was likely to result in it recovering less than it would through a sales process, the report said. This would require investor approval.
Some 60 per cent of the shares were in the hands at the time of employees, led by then chief executive Brian Harvey, former staff and individuals who had received Siteserv stock for selling businesses to the company in the past.
The €5 million figure stemmed from Davy’s suggestion in December 2011 that the amount be based off the average 3.85c price at which Siteserv’s shares had been trading over the previous 12 months.
IBRC never asked Davy to update the calculation between December and the announcement of the sale in March, a period during which the stock fell in value. The Commission concluded Siteserv shareholders stood to receive as little as €2.89 million if the figures were updated. This would have resulted in IBRC receiving up to €2.11 million more from the transaction, it said.
