Bank of Ireland (BoI) stepped up its bid for Abbey National today by revealing it was willing to offer shareholders £1.9bn in cash as part of the deal.
Dublin-based BoI added that savings generated by bringing the two groups together would reach as high as £400m before tax.
It said: “There is a compelling and strategic commercial rationale for the combination of Bank of Ireland and Abbey National.”
Abbey National rebuffed BoI’s takeover approach last week, claiming a tie-up was not in the best interests of its shareholders.
But BoI’s detailed proposals were not released until today and some in the City feel a sizeable cash offer could still swing investors round.
BoI revealed the total value of its proposal was worth between £9.8bn and £10.3bn based on yesterday’s closing stock market prices.
It said it was willing to offer Abbey shareholders between 90 and 95 shares in the new combined business for every 100 Abbey shares they already hold.
And it was also prepared to offer 130p in cash for every Abbey National share, a total cash sum of £1.9bn.
BoI added the new group would be based in Dublin and led by its chief executive Mike Soden.
Management would be “drawn from the best of both organisations”.
Abbey has long been viewed as a takeover target and it also emerged last week that the National Australia Bank had pursued the group.
NAB, parent of Clydesdale and Yorkshire Banks, confirmed it had made an approach to Abbey but talks with the mortgage bank were now at an end.
Abbey has also been linked with both Bank of Scotland and Lloyds TSB, the latter’s bid for the bank was eventually blocked by the government.
A BoI spokesman said he hoped Abbey shareholders would see the benefits of a tie-up and that it was hopeful of re-opening talks.
He said: “It will be up to shareholders to look at this. They now have the information and they can make an informed judgment.
“We have been saying since this story first came out that this proposal was serious, it was very detailed and had been given a great deal of thought.
“It deserves better than the response it got.”
BoI’s approach values each Abbey National share at between 678p to 708p based on Monday’s closing prices.
The value represents a premium of 10% to 15% and Abbey’s shares surged 7% in early trading to 664p – their highest level for a month.
A spokesman for the mortgage bank said, however, that there was “nothing new” in BoI’s proposals and a formal statement would be made soon.
Analysts said there was unlikely to be a positive response from Abbey and added much of the cost savings could come from its own restructuring work.
Sarah Horder, banking analyst at Teather & Greenwood, said: “I still imagine Abbey is going to hold out.”
Bank of Ireland’s shares have slumped since it first announced its takeover approach and this has in turn hit the amount it can pay.
The value of the deal on September 18, the date of the proposal, was 770p to 805p given the closing stock market prices of each group the previous day.
Abbey has around 2m private shareholders, representing a third of its shareholder base, and employs 28,500 staff.
BoI has a workforce of 18,500 people with 5,500 employed in the UK. It would not comment on possible job losses as a result of the deal.
EGi News 15/10/02
