Davy gave Warburg Greencore indemnity: Broker felt overseas firm 'would look better'

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THE DUBLIN broker J&E Davy asked SG Warburg, Britain's largest merchant bank, to buy 2.45 million shares in the botched Greencore placing on the basis that Davy would be responsible for any losses arising, writes John Murray.

Kyran McLaughlin, a director of Davy, said yesterday that the broker asked Warburg to buy the stake because it would look better for the placing for an overseas holder to have bought the shares.

Davy meanwhile bought in a further 4.5 million shares through associate companies. The Irish Stock Exchange is investigating whether the market was misled at the time about the success of the placing.

Warburg agreed to buy the shares after the cancellation of an earlier arrangement for the two firms to share underwriting on up to 10 million of the 25 million shares on offer in the placing. It received no further fee.

Mr McLaughlin said: 'We cancelled the original agreement for Warburg to share the underwiting. Warburg was paid a compensation fee for cancelling that deal.

'We would have thought that for them to buy the shares was different from us buying the shares to complete the placing.'

Warburg said the stake was a non- disclosable holding as it was less than 3 per cent of the company. Derek Higgs, Warburg's corporate finance chief, said: 'There is nothing that gives us the slightest concern. We were not aware of the bigger picture on the day of the placing as we were not joint brokers. It is the sort of thing that happens at the fag end of a placing.'