Bank of Ireland has this morning given further details of the informal merger offer it made to UK bank Abbey National last week. The offer valued Abbey National at about €16 billion.
As detailed in our top story Abbey has rejected this proposal in a statement issued at lunchtime.
The deal included a cash offer of £1.30 sterling for each Abbey National share and between 90 and 95 Bank of Ireland shares for every 100 Abbey National shares held.
The value of the cash offer is equal to £1.9 billion sterling. The proportion of shares distributed as part of the offer will be dependent on the movement in the share price of each bank.
These terms resulted in a value of 770-805 pence for each Abbey National share, which gives a premium of 18-25% (based on Bank of Ireland and Abbey National's closing price on September 17) and 678-708 pence, which gives a premium of 10-15% (based on the closing share prices on October 14).
Based on last night's closing prices Abbey National shareholders will hold 57% of any merged entity while Bank of Ireland shareholder will hold 43%. The merged entitity would have a combined market capitalisation of €24 billion.
Bank of Ireland said a merger would lead to pre-tax cost savings of €641 million (£400 million sterling).
Bank of Ireland said the combined group would be led by its current boss Mike Soden as Chief Executive. The head office of the combined group would be in Dublin. It would have a primary listing on the London Stock Exchange and would also retain a listing on the Dublin Stock Exchange.
Bank of Ireland said it believed it is in the interests of its stockholders and the shareholders of Abbey National to provide information on the detailed proposal it made to Abbey National on September 18.
'We believe that our proposal would create significant value for Bank of Ireland stockholders and would produce greater value for Abbey National's shareholders than a standalone strategy,' Laurence Crowley, Governor of the Bank of Ireland said.
'Bank of Ireland has a strong commitment to stockholder value and will not contemplate any action that would compromise that commitment. Our management team has developed detailed business plans based on sound commercial, strategic and operational principles, and on the obvious strategic fit between the two groups,' he added.
Mr Crowley said he was willing to meet again with Lord Burns, Abbey National's Chairman to discuss how the two banks might co-operate to explore the opportunity further.
Bank of Ireland shares were up 45 cent to stand at €10.05 in Dublin this afternoon. Abbey National shares had soared nearly 10% in London to £6.71 in London this afternoon.
