AIB silent on Eagle Star rumour

AIB was keeping quiet yesterday on speculation that a deal to buy the pensions arm of Eagle Star had hit the rocks.

A spokeswoman for the bank said she had no comment to make on reports that the deal had run into trouble. AIB has not commented on market talk that it was actually looking to buy Eagle Star, but it is widely believed to have been carrying out due diligence for a number of months. The whole of Eagle Star, including its insurance business, was put up for sale by its owners, Zurich Financial Services.

AIB is said to be keen to get their hands on the pension arm to add to its own Arklife business and bolster its market share. The price tag could have been up to €500 million, though AIB would have been able to make cost-savings by merging it with Arklife. It made profits of €60m in 2003.

It is not known why talks, going for close on six months, have cooled and some brokers had expected AIB to announce the acquisition of Eagle Star when it published its 2003 annual results in February. At a press conference to announce the results, AIB chief executive Michael Buckley said he wanted the bank to expand its presence in the pensions area.

Eagle Star has been the subject of repeated speculation as a result of increasing pressure on its parent, the Swiss-based Zurich Financial Services group, to dispose of non-core assets to improve its financial position. Zurich has been involved in an extensive programme of disposals in recent months.

Market analysts said Ark Life was weaker than its competitors, and that AIB would benefit from a broader product range, and better access to distribution channels, such as brokers. If the bank fails to clinch a deal it will leave brokers wondering what strategy AIB will pursue for its future growth. The bank reported profits up just 3% in February and an acquisition may be what it needs to raise the share price.

On the issue of its stake in the US bank, M&T, in which it has a 22.5% stake AIB said it saw no rational for selling its stake, but at some stage it may have to whether to dilute this and take the profits up to a full bid to benefit from M&T strong profit growth.

Another option would be to offload its Polish arm, Bank Zochodni WBK, and use the cash to make an acquisition. BZWBK has seen lower profits for the past few years.

AIB shares closed up by just under 1% yesterday.