‘IL&P may be ripe for takeover’
It says that though there is only speculation floating around the market, a bid for IL&P by British bank Halifax Bank of Scotland (HBOS) would make sense.
In a research note yesterday Dolmen head of research Stuart Draper said the cost savings from a takeover of IL&P would make it feasible given the greater retail focus, larger branch network and more extensive product range.
“For example, both HBOS and IL&P are the largest mortgage lenders in the UK and Ireland respectively,” he said.
There are few existing opportunities for domestic financial institutions to merger, with the size of Bank of Ireland and AIB preventing them from doing a takeover on competition grounds.
Bank of Scotland is keen to expand here following its acquisitions of Equity Bank and ICC Bank in recent years and has made a push for the mortgage and business markets. A takeover of IL&P would allow it to catch up on AIB and BoI, and see it leapfrog the freshly-combined Ulster Bank/First Active, owned by Royal Bank of Scotland (RBOS).
“Following last year’s RBOS purchase of First Active, there is a limited supply of suitable Irish financial services businesses available for international acquirers, and the RBOS deal proves that the regulatory and cultural barriers are lower for a UK acquirer.
“With the full £800m per annum of synergies from the 2001 Halifax and Bank of Scotland merger being generated, now may be a suitable time for HBOS to do another deal and follow in RBOS’s footsteps with a deal in Ireland,” the broker said.
And Irish Life & Permanent would be a good fit for HBOS as, “IL&P is a very pure play on the attractive demographics of the Irish financial services’ market. It does not come with any troublesome foreign subsidiaries attached, and its UK mortgage business has previously been for sale,” Mr Draper wrote.
He added that using the same 16 times historic earnings per share that RBOS paid for First Active would generate an estimated takeover price per share for IL&P of €17.50, a 30% increase on IL&P’s 2003 earnings target.
Banking shares have had a good run in Ireland over the past few weeks following merger activity in the sector. Mr Draper said earlier this week that Bank of Ireland would make an ideal takeover candidate with Credit Suisse as a potential purchaser, if it has the financial muscle to mount a bid. Bank of Ireland is seen as a target after it failed to snap up Abbey National over a year ago, which would have doubled BoI’s size.
Shares across the financial sector were up again yesterday following positive news. In the US, JP Morgan acquired the Bank One Corporation for $58bn.
