First Active shares closed up more than 30% in Dublin following an announcement that Royal Bank of Scotland has offered to buy it for €887m or for €6.20 per share, saying that the combination of First Active and Royal Bank of Scotland's subsidiary Ulster Bank will create a highly effective challenger to the larger competitors in the Irish banking market.
Royal Bank of Scotland Group promised there would be only 'modest' job losses if the deal, which is subject to Stock Exchange approval, went through.
'The job losses are very small. We're talking a small number of hundreds,'Royal Bank of Scotland chief executive Fred Goodwin said.
The Irish Bank Officials Association (IBOA) has insisted that there be no compulsory redundancies as a result of the proposed takeover. IBOA general secretary Larry Broderick there was no business rationale for compulsory redudancies, and the union was arranging formal meetings with with Ulster Bank and RBOS to discuss the bid and ensure memebers jobs and terms and condititions were protected into the future.
First Active currently employs 673 staff, and Ulster Bank 4,927. Goodwin said the job losses would occur in both organisations.
Each First Active Share has been valued at €6.20, representing a premium of approximately 33.3% to the closing price on Friday, and the entire issued share capital of First Active is valued at approximately €887m.
Both First Active and Ulster Bank will retain their own brands, branch networks and distinctive customer propositions. Cost savings will be achieved by combining funding, technology and processing activities and central functions.
Cormac McCarthy, First Active chief executive, said that with the capital distribution of €1.12 per share earlier this year this is a premium of 156% above price at flotation six years ago. 'One thing that is particularly interesting in this deal is that our typical smaller shareholder with 1000 shares will receive a payment of about €6,000,' he said.
When the bank emerged from a moratorium earlier this year its chief executive gave the impression that First Active would 'go it alone' as an independent presence in Irish banking.
But this morning McCarthy told RTÉ: 'I think we have always said that being independent was a viable strategy for First Active, but as you can see from the announcement this is a huge recognition of the success we have had in First Active. Ulster Bank and First Active will retain their own brands, branch networks and customer proposition so there is a huge opportunity to work as part of a combined operation delivering something really different in the Irish banking market.'
Fred Goodwin, Royal Bank of Scotland group chief executive said: 'We see an opportunity to bring together the strength of the infrastructure that Royal Bank of Scotland and Ulster Bank can bring with the First Active brand and customer base and some of the dynamic within the First Active buisness.'
Goodwin added: 'We have an opportunity to do something quite significant here within the banking market to challenge the dominant competitors. Both First Active and Ulster Bank are significant players in the banking market but this brings them together into a much stronger force and the consumer always benefits from comppetiton.'
In the Republic of Ireland, the combined business will have approximately 800,000 personal and business customers and a network of 173 branches. Across the Republic of Ireland and Northern Ireland, there will be approximately 1.3 million personal and business customers and 263 branches.
First Active shares closed €1.48 higher at €6.13 in Dublin.
