Bank of Ireland determined to pursue Abbey National takeover

BANK OF IRELAND is still very much in the race to take over Abbey National despite the slamming of the gate on a buyout by the board of Britain’s sixth-biggest bank yesterday.

Abbey National made the initial running early yesterday morning by issuing a brief statement rejecting Bank of Ireland’s takeover offer.

Abbey said its board had met on Monday and decided the best means of restoring shareholder value would be through its own restructuring plan.

The bank is cutting costs and cleaning up its corporate banking business, which has been hit by bad loans and junk bonds.

“The board of Abbey National has therefore determined that the Bank of Ireland’s approach is not in the best interests of shareholders,” it said.

Bank of Ireland initially expressed disappointment, saying it was surprised Abbey has adopted such a position without any engagement or discussion between the two companies.

At lunchtime the Irish bank issued a second statement which left no doubt it intends to continue the chase of Abbey National.

“On 19 September last, Bank of Ireland provided Abbey National with sufficient detail of Bank of Ireland’s intent, of the tangible and immediate financial benefit that would accrue to Abbey National shareholders, of the significant synergies that could be realised, and of the structure of a combined entity, to merit meaningful engagement and consideration in the interests of its shareholders,” it said.

“Subsequently, Bank of Ireland made repeated efforts to achieve engagement with Abbey National. Bank of Ireland reiterates its view that, subject to agreement on appropriate terms and satisfactory due diligence, a combination of Bank of Ireland Group and Abbey National plc would deliver significant value for both sets of shareholders.”

Abbey directors Lord Shuttleworth, Mac Millington, Mark Pain and Lord Burns all bought extra shares in Abbey on Monday in the wake of the Bank of Ireland offer becoming public.

Shares in Abbey shot up from seven-year lows on Monday after news over the weekend of Bank of Ireland’s overtures.

The shares continued to soar yesterday.

Bank of Ireland has pledged to reveal more details of its offer to Abbey National. The offer may now be countered by a rival bid from National Australia Bank (NAB).

Analysts said Bank of Ireland may not be able to sweeten its offer given that its shares fell on Monday, making a share deal more expensive. “Undoubtedly it will be difficult to go back with a sweetened offer, and I think this will prompt National Australia Bank into the ring,” said Goodbody Stockbrokers analyst Len Riddell.

But ING analysts said the Irish bank could pay at least stg£7.50 a share and still make the deal.

BNP Paribas banking analyst Hugh Pye expects Abbey shares to push towards stg£6.00 on the strength of the bid. “The only strong bidders would be the UK banks, but they are not allowed to bid (due to competition issues),” he said.

Additional reporting: Reuters.