Allied Irish shareholders debate sale of M&T stake

AP News
Posted: Nov 01, 2010 8:23 AM
Allied Irish shareholders debate sale of M&T stake

Shareholders of embattled Allied Irish Banks debated Monday whether to sell a 22.4 percent stake in M&T Bank of New York _ one of the group's few profitable foreign assets _ part of an uphill struggle to prevent it from becoming the fourth Irish bank taken over by the government.

An extraordinary general meeting at Allied Irish headquarters was expected to approve the M&T sale through a public offering at $77.50 (euro55.75) a share. The result was expected after 5 p.m. (1700GMT).

Allied Irish's newly appointed chairman, former HSBC chief financial officer David Hodgkinson, told shareholders they needed to drum up as much cash as possible to minimize the growth of the stake held by the government.

Ireland already owns 18.6 percent of Allied Irish shares but could end up with more than 90 percent if Allied Irish cannot meet regulators' demands to drum up euro10.4 billion ($14.5 billion) by the end of the year. Hodgkinson estimated the M&T sale would net Allied Irish euro900 million ($1.25 billion).

"This transaction represents ... a good price in the current uncertain market conditions," Hodgkinson said. He said it that if the sale did not go through, it was "likely" that Ireland through its pension reserve fund would take a greater stake in the company, further diluting existing shareholders.

Even with an M&T selloff, Allied Irish is expected to fall several billion short of its end-of-year cash requirements and cede majority control to Ireland's government, which has already taken control three smaller Irish banks: Anglo Irish, Irish Nationwide and the Educational Building Society. In all cases, the 2008 collapse of Ireland's property market left the nation's banks with tens of billions in defaulting loans to construction and land tycoons.

Allied Irish is seeking buyers for all of its operations outside the Republic of Ireland, a strategy that some analysts consider short-sighted and counterproductive given that these assets offer the most hopeful routes for growing future earnings.

In September, Allied Irish sold its 70 percent stake in Bank Zachodni of Poland to Spain's Banc Santander in a deal that will earn the Dublin bank euro2.5 billion. That sale still must receive shareholder approval in an EGM yet to be scheduled.

The bank also its sold its stockbroking division, Goodbody, to Irish company Fexco for euro24 million in September.

Allied Irish still plans a euro5.4 billion sale of new shares that are expected to be acquired primarily by the government. Allied Irish also has been seeking a buyer for its British division, which includes the First Trust bank network in Northern Ireland.

Allied Irish shares rose a fraction of a cent to euro0.34 in midday trade on the Irish Stock Exchange, hovering above their all-time low of euro0.32.

The shares _ long a foundation for Irish pension funds _ were worth more than euro23 three years ago when analysts considered AIB best positioned among Irish banks for growth, given its strong Polish, British and American assets.