State to claw back up to €3.8bn from AIB sale

The Government looks set to raise up to €3.8bn from this month’s sale of the first tranche of the State’s 99.8% stake in AIB.

The bank is also set to have a company valuation worth between €10.6bn and €13.3bn upon a quarter of its shares going live on the Irish and London stock exchanges at the end of June.

After effectively giving the green light last month to the sale of 25% of the taxpayers’ 99.8% holding in the bank, the Department of Finance last night issued the formal prospectus for the partial initial public offering (IPO).

The department said the expected price range per share is between €3.90 and €4.90, with approximately 679m ordinary shares being made available. The final offer price for shares is expected to be announced “on or around” June 23, with shares to be admitted to both stock markets around June 27.

The approximate value of the offer is worth between €2.6bn and €3.3bn to the State. However, that range of claw-back rises to €3bn-€3.8bn when the full exercise of the “over-allotment option” is taken into account.

Regarding the €10.6bn- €13.3bn valuation, a department spokesperson said the higher end of the range is “aspirational”, while the Government would be happy with a figure in the mid-point of the range.

In February, the National Treasury Management Agency (NTMA) valued AIB at €11.3bn.

Raising €3bn from the 25% sale has long been hoped for, but fears had begun to emerge that the Government may have had to settle for less with European banking stocks and sterling both wobbling after the British general election, and a forced sale needed in order to save troubled Spanish lender Banco Popular.

However, Finance Minister Michael Noonan yesterday reiterated his positivity around the timing of the move.

“The time is right to move to the next stage in AIB’s IPO process as market conditions remain favourable,” he said.

Mr Noonan added that he has been encouraged by the “strong level” of interest shown by investors in the offering to date.

“A successful transaction would represent an important milestone in our journey to dispose of our banking investments and, ultimately, recover all the money the Irish State has invested in AIB,” he said.

The programme for government allows for the sale of no more than 25% in AIB, meaning that if the current Government runs its planned course, a further tranche of the State’s AIB shareholding may not be offloaded for another two years or so.

That said, Fianna Fáil’s finance spokesman Michael McGrath welcomed the timing of the initial float as a helpful signpost to recouping more of the near-€21bn the State is owed from bailing out AIB nearly seven years ago.

While he said the question of what to do with the proceeds from the partial sale is a separate issue, Mr McGrath called the sale itself “an important step and one which we welcome”.

“The overall valuation seems to be in line with expectations and the sale appears to be progressing well. It’s a statement of confidence in our financial system and will help the State to recover some of the €21bn it is owed,” said Mr McGrath, adding that it can also offer “a proper understanding” of the value of the State’s remaining 75% stake in AIB.