Walter Hobbs (top) and Siteserv non-executive director Robert Dix and chairman Hugh Cooney at Siterserv’s EGM in Davy House, Dawson Street, Dublin on April 5 2012
This morning, Mark Paul, in the Irish Times, reports on Finance Minister Michael Noonan’s announcement that KPMG is to carry out a review of the sale of Siteserv to Denis O’Brien’s Millington.
Kieran Wallace and Eamon Richardson of KPMG, the IBRC liquidators, will carry out the review.
From his piece Mr Paul writes that this may be deemed controversial because the Siteserv sale was overseen by Davy and…KPMG.
In effect, the special liquidators from KPMG will review the probity and commercial reasoning behind a transaction that was approved in 2012 by KPMG, albeit by a different department of the accounting firm and by different executives.
Still, this issue of a perceived conflict of interest is likely to be one of the first sticks grasped by the Opposition to beat the Government.
But there’s more.
It also seems likely that there may be further unease given that non-executive director at Siteserv Robert Dix, and chairman of Siteserv Hugh Cooney also have connections with KPMG.
Both Mr Dix and Mr Cooney were vocal in support of the Millington bid at the shareholders’ EGM in April 2012 when Siteserv officially voted to accept the Millington offer, despite reports of higher bids.
According to Mr Dix’s LinkedIn profile, he was a partner in KPMG from 1998 until 2008. It states:
“Initially worked in Audit. Set up Transaction Services in KPMG Ireland in 1999 and ran the division until retirement in 2008 providing mergers and acquisition advice to clients.”
As for Mr Cooney, according to Bloomberg, he’s a consultant and company director at KPMG.
Meanwhile Walter Hobbs, IBRC’s independent expert, who appeared on RTÉ’s Prime Time last night to defend the Siteserv sale, was himself a director at KPMG.
Further to this, readers may wish to recall an article in the Sunday Independent by Tom Lyons about the shareholders’ EGM back in April 2012.
From the article, Mr Lyons wrote:
“The public, the media and the four non-corporate shareholders who showed up now wanted to know if Siteserv had been sold for the best price?
Gripping the podium firmly, Hugh Cooney, the chairman of Siteserv, set out the case for the defence.
Mr Cooney admitted that Anchorage had outbid Mr O’Brien.
But, he said: “This revised higher bid was very carefully considered and was not excluded from the process.” Mr Cooney said conditions attached to this bid, which he did not detail, were less attractive than Mr O’Brien’s proposition — and so it was turned down. Altrad’s bid of €60m, he said, had only recently been received and Siteserv’s board and advisors had turned it down too as it was only “indicative” and had various conditions.
Mr Cooney then addressed the media and its reporting of Mr O’Brien, who beside being a billionaire was also an existing borrower from IBRC.
“Mr O’Brien’s offer represented the best offer in terms of price and conditions,” he said, “We were in no way influenced positively or negatively by the identity of the purchaser.”
“Robert Dix, a KPMG veteran and Siteserv’s senior independent director, who oversaw the sale, defended the company. “We identified a very large number of companies . . . the opinion of the investment committee, our advisors, the board, and confirmed by IBRC, [Mr O’Brien’s] was the best bid,” he said.
Mr Neilson [Ray Neilson of Altrad who claimed to have been shut out of the process and who bought a few shares just to speak at the meeting] was no mood to give up. “We said we would double what was going to the shareholders today and the remainder would go back to the banks,” he insisted. “We would give the banks another €11.5m, the shareholders another €3.5m. We wanted to double shareholder value and give the rest back to the people of Ireland.”
Mr Cooney again pointed to the uncertainty around Altrad’s offer price. “I am an experienced director and take my responsibilities seriously,” he said, “I am very happy to stand over the process.”
“Mr Neilson dismissed claims by Siteserv there was only a “slim” chance that Altrad would stick with its higher bid. “The reality is that with the level of synergies we’d have with Siteserv, €60m would have been a very low bid for it,” Mr Neilson said.
“That was our opening bid. If they’d allowed an open fight as we would see it, where they’d allowed in people with synergy, then I think it could have gone for well in excess of €60m.”
Then it was on to the media briefing by Mr Cooney, Mr Dix and Mr Harvey. Mr Dix was on the defence again from questions from five newspapers and RTE.
“We always knew this transaction would be open to full scrutiny because our lender was being asked to write off a considerable amount of money,” he said. The best deal, he said, had been achieved.
Pressed by the Sunday Independent on how hard the bidders were squeezed to get the maximum price, Mr Dix said: “We had a number of rounds. At the end of them we asked them to put their best foot forward. Eventually, you have to have a final round. Denis O’Brien put the best foot forward.
“Because of leaks to the papers the business came under pressure from its creditors because there were questions around the financial viability of the business,” he explained. “We had to quickly get a transaction done at the best price.”
Mr Harvey is a big shareholder in Siteserv, who will share in some of the €5m in cash being given back to shareholders. The Sunday Independent asked him whether he had significant personal borrowings from IBRC.
“I don’t think it is relevant to anything like this,” Mr Harvey said. “I think that’s unfair,” Mr Cooney said. “We have evaluated all the offers and made a decision. The question you have just asked is inappropriate. You are challenging the robustness of our process.”
Mr Dix said he was aware of “noise” from under-bidders, who he admitted were “unhappy”. The Financial Times asked him why he had not taken the higher Anchorage bid.
“What does more mean?” Mr Dix said. “There are headline prices. All bids were subject to due diligence, subject to deductions for this type of debt, that type of tax. The price in a sense is meaningless. . . the net figure from [Mr O’Brien] was higher.”
Mr Cooney said Siteserv was under pressure to complete the deal swiftly at the end. “Because of the media speculation, credit insurers were threatening to withdraw cover, which was putting further pressure on the company … speed was of the essence,” he said.
Mr Cooney said he believed Siteserv could have lost contracts if the process had been allowed to drag out longer by allowing Altrad another eight weeks to put a bid together.
The Financial Times said this would not have been an issue if Altrad had been brought into the process sooner. “I just can’t understand why two really good advisers, Davy and KPMG, didn’t identify this company. Did they screw up?” it asked. Mr Dix denied this.
The Sunday Independent asked had Siteserv’s advisers run enough bidding rounds to shake out the highest bid. “I am not going to get into the detail,” Mr Dix said. “Each offer was fully researched and developed at every stage. . . It wasn’t rushed through, it took six months.”
Mr Dix said Denis O’Brien’s reputation in the fallout of the Moriarty tribunal report was irrelevant and he said it would have no impact on Siteserv bidding for Irish government contracts.
“I have no concern,” Mr Dix said. “Denis O’Brien is a very successful businessman. Those tribunals are something different. They have nothing to do with me or Siteserv. The EU Commission said in the case of Padraig Flynn [the former European Commissioner who was pursued by the Mahon tribunal] it was nothing to do with him. I think it is something separate from commerce, quite honestly.”
As the briefing ended, Mr Dix gave his final thoughts on a bizarre and fractious end to Siteserv’s days on the Irish Stock Exchange.
“We honestly believe it was run in a fair and transparent way and the outcome was the best for IBRC and all other stakeholders,” he said.
After three firm handshakes, Mr Harvey, Mr Cooney, and Mr Dix ended the briefing.
But where was the taxpayer and IBRC’s man, Mr Hobbs, who couldn’t make it because of a prior engagement?
The Sunday Independent tracked him down on his mobile after IBRC and Siteserv could not immediately reach him.
“There was a lot of different considerations, not just price,” Mr Hobbs said. “We are very happy with the outcome. In these situations everything is carefully considered,” he said.
Tom Lyons: A done deal, but were taxpayers the losers? (Sunday Independent, April 8, 2012)
Pic: Irish Independent
Opposition lashes out at plan for SiteServ review (BreakingNews)