On March 9, The Currency first reported that Bank of Ireland had approached Davy about buying the stockbroker, which was under mounting pressure following a bond trading scandal. The broker was soon put up for sale, and now Bank of Ireland is reported to be closing in on a deal to buy Davy for €400 to €420 million net of cash reserves. So, the next big question is who stands to benefit from the sale of the disgraced stockbroking firm, whose shares are owned by current and past staff members through a complex offshore structure.

As things stand, this includes several of the 16 consortium members who personally benefited from the 2014 bond trade excoriated in a recent Central Bank investigation, some of whom resigned in March as senior leaders of the firm following the scandal.

The transaction would most likely see Bank of Ireland acquire the group’s main trading entity J&E Davy or its immediate parent J&E Davy Holdings, with proceeds trickling up to White Note, an unlimited company registered in the Isle of Man that acts as the stockbroker’s holding centre.

As detailed by The Currency in March, while former chief executive Brian McKiernan and deputy chairman Kyran McLaughlin resigned their board seats at J&E Davy and J&E Davy Holdings at the same time as their leadership positions, they remain as directors of White Note and two intermediary holding companies. One is Red Note, a Manx company whose other director is David Smith, also a member of the Davy 16 consortium; the other is Green Note, registered in Ireland with interim Davy chief executive David Byrne and chief risk and regulatory officer Caitríona O’Kelly as co-directors.

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None of these companies has reported any changes to their board’s composition since March. This means that O’Kelly, who moved into the senior compliance role in the wake of the scandal from her previous position as chief financial officer, and Byrne, who was previously chief executive of AIB, will be the only directors without involvement in the 2014 controversial bond trade when the time comes to share the spoils of Davy’s sale.

O’Kelly, in particular, is on her own alongside McKiernan, McLaughlin and Smith in White Note’s boardroom.

The articles of association of White Note show that its directors have authority to distribute dividends. The rules also provide for separate dividends to be paid in respect of two classes of shares, A and B. Such dividends may soon include proceeds from the sale of Davy. If White Note was wound up, funds would be distributed equally among shareholders. The proportion of A and B shareholdings is undisclosed.

B shares are indirectly held in Ireland through Ailmount Investments by this company’s 30 shareholders, all current or past Davy executives and brokers. They each have an equal claim to distributions made through this channel.

The names highlighted in pink are those shareholders of Ailmount Investments named as members of the Davy 16 consortium in Davy client Patrick Kearney’s latest High Court action. The other defendants in the case without a share in Ailmount are Tony O’Connor, Finbarr Quinlan, Joseph McGinley, Fiona Howard, Donal O’Mahony, Pat Lyster, Barry King, Barry Murphy, Eamon Reilly and Stephen Lyons.

Meanwhile, A shares in White Note are held through a group of intertwined companies in the Isle of Man, ultimately owned by a Gibraltar corporate secretary on behalf of undisclosed beneficial owners. The directors of these intermediary holding entities are McKiernan, Byrne and O’Kelly.

Information obtained by The Currency at the end of last year showed that the largest ultimate shareholder in Davy was McKiernan, who owned over 10 per cent of the business at the time and had been adding to his stake by buying shares from other members.

The internal grey market operating for such transactions between current and past employees of the firm put its value at around €240 million. This indicates that McKiernan stands to double the investment he has made to build up his shareholding in recent years.

McLaughlin, meanwhile, was estimated to own about 5 per cent of the company. Davy’s former chief executive Tony Garry was believed still to hold at least as much, after selling down his stake over the years. 

Other ex-Davy staffers are understood to have retained shares until recently and set to benefit from a sale. They include the following, none of whom have been named among the Davy 16 consortium:

  • Retired corporate finance broker Ronan Godfrey, with an estimated 3 per cent shareholding; 
  • His former colleague Eugenée Mulhern, now a senior advisor at A&L Goodbody;
  • Davy’s ex-British office CEO Stephen Felle and its former head of wealth advice Adam Cleland, who together went on to found Argeau;
  • Davy’s former finance director Peter Newman;
  • The firm’s past head of HR Joan McGrath;
  • Its former head of regulation and compliance Ger Knowles; and
  • Robert McGlynn, a former director of the wealth management division of Davy, and Anthony Moyles, who also worked in private wealth, who left the firm to set up Cadence Capital.

As of late 2020, former executives owned around 30 per cent of Davy. With McKiernan and Nangle now in this category, past staff members may currently own more than half of the firm. Its remaining shares are held by current employees, none of whom were part of the Davy 16 consortium.

Further reading: Davy in disgrace

Part 1 – the Belfast developer, the Davy bond dealer and the ex-Anglo banker
Part 2 – Heated exchanges, swearing and pressure points as a secret plan comes together
Part 3 – Denial, indifference and the ten days that shook Davy to its very core