AIB is planning an offer to buy out thousands of legacy shareholders with small holdings whose stakes were catastrophically diluted by the bank’s crisis-era bailout – but who still account for almost 90 per cent of registered shareholders.
The bank is proposing a resolution at its annual general meeting (agm) on May 2nd to allow it to launch a so-called odd-lot offer to acquire as many as 20 shares from individual investors, according to meeting documents posted this week. Sellers would be offered 5 per cent more than the prevailing share price as an incentive.
An offer for 20 shares would equate to cheque of a little over €100, based on AIB’s current stock price. However, if such investors were to sell their shares through a stockbroker the proceeds would almost entirely be absorbed by related fees, the bank noted.
“It represents an obvious holding that is trapped or uneconomic,” AIB said.
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A holding of 20 shares equates to what were 5,000 units of AIB before it moved in 2015 to swap every 250 shares in issue at the time for one new share. That transaction was designed to reduce the number of shares circulating as a result of its post-crash bailout. Close to half of the bank’s €20.8 billion Government rescue came through the purchase of new shares.
At their peak in early 2007, 5,000 shares – the equivalent of 20 today – would have had a market value of €119,750, or €23.95 each.
The bank said the plan to launch an odd-lot offer was in response to calls from shareholders for such a mechanism, as they – or, in many cases, the estates of deceased legacy investors – cannot realise any remaining value for their shares on the market on account of dealing costs.
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A repurchase would crystallise large capital losses for pre-crash investors, even if they could be used to offset tax on investment gains elsewhere. AIB has promised to publish a document on tax considerations for investors at the time of an offer.
AIB said the average legacy shareholder holds 4.36 shares. These would have been worth €26,105 at the time of the 2007 high.
If all shareholders with no more than 20 units were to avail of a buyout offer it would cost the bank about €1.5 million, before broker fees.
Almost 69,000 of AIB’s 75,000 investors are in this small holdings category – but, combined, represent only 0.01 per cent of all its stock.
“The company’s recurring costs of administration resulting from the relatively large number of shareholders are disproportionate to the size of these small shareholdings and affect shareholders as a whole,” it said.
“The directors believe that an odd-lot offer would be to the benefit of shareholders as a whole as it will lower the company’s cost base and will facilitate a reduction in the number of shareholders in the company in an equitable manner.”
The offer will only be extended to shareholders in the Republic and the UK, it said.
Meanwhile, AIB outlined plans in February to buy back a further €1 billion of its shares from the State in the coming months. It would reduce the Government’s holding to about 35 per cent from almost 40 per cent, based off where the stock is currently trading and an expected cancellation of the repurchased shares.
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