Bank of Ireland files court proceedings against former Davy shareholders’ company

Bank of Ireland has filed proceedings against a company controlled by former shareholders in Davy, the stockbroking firm it bought in 2022 for €427 million.

The bank is threatening to withhold about €15 million in cover related to historical legal claims against Davy, and has filed proceedings against Ailmount Limited, which is owned by roughly 700 former shareholders in Davy.

Bank of Ireland is claiming it is entitled to do so under certain indemnity clauses within the contract of sale struck in 2022.

Ailmount is represented by Dentons solicitors, while A&L Goodbody is representing Bank of Ireland.

This is the second set of proceedings between Bank of Ireland and Ailmount arising out of the deal.

Last year, Ailmount initiated proceedings against Bank of Ireland claiming the bank had failed to make a payment of about €20 million due as part of the acquisition.

That case is currently in the midst of lengthy discovery applications. In February, Bank of Ireland was ordered to disclose more information related to the sale.

Ailmount, through its solicitors, is attempting to have the new proceedings included in the existing suit.

It is not clear yet which specific claims are subject to the dispute over indemnity, but the sale of Davy was precipitated by a dispute – later settled – with Patrick Kearney, a property developer, over his investment in more than €5 million worth of Anglo Irish Bank bonds.

As part of that deal, 16 of Davy’s employees, including its senior managers, formed a consortium to buy a bond from Kearney without disclosing that they were the buyers. They then sold the bonds on at a profit.

That deal ultimately led to a Central Bank of Ireland fine of €4.1 million, after the regulator found the firm had been in breach of market rules.

It eventually led to the sale of Davy to Bank of Ireland in 2022, with several key management figures enjoying a significant profit from the sale of their stakes.

Bank of Ireland announced the deal to buy Davy in July 2021, with an original total consideration of potentially €605 million, made up of a purchase price of €440 million, a payment of €40 million to be made some time after 2025 based on certain performance targets, and €125 million to account for a significant amount of cash on the company’s balance sheet.

However, the following year the bank announced that the price for the business had been reduced from €440 million to about €427 million “after adjusting for the capital position of Davy as of 1 June 2022″.

Since then, the sides have been in dispute over various elements of the share purchase agreement.

Ailmount has about 720 investors, including Davy’s former chief executive Brian McKiernan, and senior management figures such as Barry Nangle and Kyran McLaughlin. It also includes among its shareholders about 300 people who are now Bank of Ireland employees following the acquisition.