SFA to examine Warburg role in Greencore fiasco: Probe to focus on underwriting arrangements with Irish broker

THE SECURITIES and Futures Association, the London regulator, is to examine the role of SG Warburg, the merchant bank, and of J&E Davy, the Irish broker, in the botched placing of Greencore shares that unwound amid controversy last week.

Geoff Turner of the SFA said yesterday: 'Once the Greencore listing is restored, we will consider the fitness and properness of Davy and Warburg.'

The SFA inquiry will follow two other investigations being carried out by the Dublin Stock Exchange and the Irish attorney-general.

It will focus on the underwriting arrangements that Davy, the Irish government's broker, made with Warburg. The chairman of Davy, Brian Davy, said at the weekend that Warburg was offered a partial indemnity for agreeing to take up to 10 million shares in Greencore, worth pounds 27m at the offer price of 275p.

The indemnity would have limited any loss suffered by Warburg. It is understood that other firms were not offered the same terms.

The placing of the government's 30.4 per cent stake in the privatised Irish foods group raised pounds 68m.

It also emerged at the weekend that the trigger for Davy disclosing difficulties with the placing was legal advice to Davy about the deal with Warburg and the parking of shares in Davy-related companies.

It had previously been believed that Davy had raised concerns about the placing because its buying-in had breached the 15 per cent limit in Greencore's articles of association.

Davy altered the agreement with Warburg after it became concerned that the placing would be considered a flop if 10 million of the 25 million shares were left with Warburg.

A new arrangement was made, which left Warburg taking up just 2.5 million Greencore shares. But it is understood that Warburg expected the shares to go back to Davy. Warburg was to earn a fee of pounds 550,000 under the terms of the first agreement.

The Irish Minister for Finance, Bertie Ahern, said yesterday that Davy failed to inform him of the true nature of its agreement with Warburg.

Warburg is believed to be dismayed by Davy's handling of the affair. It is understood that the bank was prepared to take all 10 million shares if necessary.

A source said Warburg was unaware that Davy had in effect bought in the surplus 7.5 million shares covered by the original deal. Warburg also understood that Mr Ahern was fully aware of the nature of the agreement.

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