While the future may have held a better price, the deal is a general win-win

It was one of the worst-kept secrets in Irish corporate history but there was still a large turnout for the announcement yesterday of Irish Life’s sale by the Government to Great-West Lifeco of Canada.

A deal had almost been signed in November 2011 but the Canadians had last-minute jitters over the euro crisis. Understandable really.

There was much back-slapping in the Merrion Hotel by the various parties over a deal that has been characterised as a win-win for everyone.

The Government gets back the €1.3 billion in taxpayer funds that it paid to acquire Irish Life last year as the old Irish Life Permanent plc was broken into two parts.

It also gets a €40 million dividend to sweeten the deal.

Profitable firm

Great-West Lifeco has acquired a profitable company with a near 30 per cent share in the Ireland’s life and pensions market to add to the Canada Life business it already owns here. If you believe in the Irish economic recovery story, that’s a nice position to hold.

When employment grows and the mortgage market normalises again, there should be plenty of pensions and savings products to sell and mortgage protection plans to issue.

For Irish Life, there is relief at having being freed from the dead hand of State ownership and the associated executive pay caps.

Irish Life chief executive Kevin Murphy will take his leave of the company once the deal has closed in the middle of the year. He will be able to claim credit for having returned Irish Life to private ownership.

There will be an initial restructuring involving voluntary redundancies and other changes but Great-West Lifeco is promising growth into the long term. This should benefit staff and policy holders.

However, there was a nagging sense that perhaps this wasn’t the right time to sell.

Great-West Lifeco’s Northern Ireland-born president and chief executive Allen Loney was effusive in his praise of Irish Life yesterday.

He noted that Irish Life had remained profitable throughout the post-2008 credit crunch. That was no mean feat given that the sector collapsed by 50 per cent.

Its trading performance for 2012 won’t be revealed until some time in March, but we know that Irish Life Investment Managers achieved inflows last year of €3 billion, taking its funds under management to €37 billion.

The narrative has always been that Irish Life was being held back in the previous plc structure by Permanent TSB bank, which has been through the horrors since the Irish economy collapsed.

This is a profitable business, with a strong brand (Great-West Lifeco plans to fold its existing Canada Life business into Irish Life) and a market-leading share. We were told yesterday that more than 50 expressions of interest were received when the business was first put on the blocks in 2011.

That was a time when many people felt the euro would collapse. Now, the euro’s future seems a lot more secure, Ireland looks well set to exit the troika bailout programme and stock markets are perkier.

Why sell now?

Wouldn’t it have been better for the Government to sit on its hands for a couple of years, wait for the economic recovery to gather some more momentum and then sell the business?

Minister for Finance Michael Noonan’s response to this question was that the Government isn’t a fund manager and that its external advice was that this was a good deal.

Effectively, a bird in the hand is worth two in the bush.

Noonan noted that the original sale price to Great-West Lifeco in 2011 was €1.1 billion.

So the exchequer has squeezed an additional €240 million from the deal and can highlight the fact that another major overseas investor is willing to take a punt on Ireland.

This is another box ticked with investors as we seek to return to capital markets at the end of this year.

With the Government parties flagging in the polls and Fianna Fáil showing signs of a revival with austerity-weary voters, regaining our political sovereignty is crucial for the Coalition. It would give them greater latitude on how to slice and dice our budgetary affairs and offer a few sweeteners to voters in the second half of their five-year term.

In that context, the Irish Life deal might turn out to be priceless for the Government.