A bloodied BoI bows out of Abbey takeover bid

BANK OF IRELAND has retired with a bloody nose from its €16.5 billion battle to take over Britain’s sixth biggest bank, Abbey National.

Abbey National chairman Terry Burns beat Bank of Ireland hands down in the public relations battle and yesterday BoI chef executive Michael Soden decided the appointment of former UBS president Luqman Arnold as Abbey’s chief executive provided an opportune time to throw in the towel.

Given the ponderous nature in which BoI has issued statements on the takeover since news of the bid was leaked to the Sunday Times on October 6, the swiftness of yesterday’s announcement took the market by surprise.

Some analysts believe the aggressive tone of BoI’s detailed offer for Abbey on Tuesday indicated that an announcement to withdraw from the field was on the way. Lord Burns and his board have now seen off Lloyds TSB, National Australia Bank and Bank of Ireland. Before BoI withdrew, SG securities analyst John Tyce said the appointment of 52-year-old Luqman Arnold “torpedoes” the BoI bid.

Michael Soden’s position is now under threat. His clumsy and aggressive execution of the BoI bid has been described as like a dealer at a horse fair hell-bent on making a deal, any deal.

The bank’s carefully worded statement said it had been encouraged by the response it had received from shareholders following the publication of its strategic proposal to Abbey National. “However, the bank notes Abbey National’s recent statements in relation to its position on this proposal and accepts that Abbey National’s position is unlikely to change.

“Bank of Ireland has made clear from the outset that its proposal for a combination with Abbey National was dependent on Abbey National’s co-operation and due diligence.

Such co-operation has not been forthcoming. Given this position, the bank will not proceed with its proposal,” the company said in an unsigned statement to the stock exchange.

Bank of Ireland said its strategy remains to “successfully grow its business, organically and by acquisition, in its selected markets”.

“Bank of Ireland will pursue this strategy actively in order to achieve continued superior returns.”

In a statement Abbey National welcomed the announcement by Bank of Ireland. “With its new group chief executive, Luqman Arnold, Abbey National will now return to focusing fully on restructuring its business to deliver shareholder value,” the company said.

Bank of Ireland’s shares rose on the Abbey move yesterday. The 15% drop in the share price in the wake of the initial news of the Abbey bid has been wiped out. BoI is now trading at a slight premium to its price when news of the spurned bid was leaked to the Sunday Times.

The market capitalisation of BoI is up 333 million on the price the company traded before news of the Abbey bid hit the market.

However, the end of the deal was bad news for Abbey shareholders with the shares plunging by more than 9%, wiping out much of the gains that arose as a result of the BoI bid.

And the general-secretary of the Irish Bank Officials’ Association, Larry Broderick, announced yesterday that the union is seeking an immediate meeting with senior management at Bank of Ireland to discuss the bank’s future direction in the wake of its decision to abandon the Abbey National takeover bid.

“Our members in Bank if Ireland are anxious about what the future might hold for them. The recent merger frenzy in the banking industry, which has been dictated by chief executives and the boards of the banks as well as market analysts, have lent a great deal of uncertainty to those who are employed in the industry.

“This process has proven, to date, not to have been good for customers or employees,” said Mr Broderick.