Friends First to sell finance unit as parent prepares for IPO

Friends First will sell its finance operation by public tender as parent company Eureko strips out non-core operations in preparation for a possible initial public offering.

Friends First Finance, which employs 80 people, will be sold as a going concern, with the money being ploughed back into the group's insurance and asset management businesses in Ireland.

The operation, which was set up by Friends First in 1997, has a loan book of €350 million and is the fourth-largest player in the asset finance market in Ireland. It covers asset finance, car finance and retail consumer lending.

The business is expected to attract interest among the other leading players in the sector - Permanent TSB, Bank of Scotland and GE Capital Woodchester.

Bank of Scotland has consistently signalled its intention of expanding market share and will be familiar with Friends First's operation as it was set up by two executives who have since moved on to oversee a similar unit at Bank of Scotland.

GE Capital has also been aggressive in growing its business both here and further afield.

Permanent TSB, which sees itself as the largest player in the field, is thought to be slightly less likely to move for Friends First Finance.

A spokesman for Friends First last night said the decision to sell the "successful and profitable" business followed a strategic review carried out by the company and its owner, Eureko.

He said Eureko had recently sold a number of "non-core banking/finance businesses within the group".

Friends First chief executive Mr Adrian Hegarty said: "Friends First Finance has been a real success within the group, supporting our strategy of delivering a multi-specialist financial services proposition to the Irish market.

"We believe the sale will allow the business and the team to take Friends First Finance to the next level, while we focus on our core activities within the life and pensions industry in Ireland."

The finance unit has been a small part of the group's business in Ireland. Friends First has total assets of €4.4 billion and employs 450 people.

GE Capital chief executive Mr Seán Webb said his company would consider any opportunities to grow its business.

"The key thing is how the business breaks down between its various components and that will only become clear through due diligence," Mr Webb said.

Friends First Finance's business is predominantly in equipment and motor finance, although it lags Permanent TSB and GE Capital in the spread of dealers with whom it has links.

One observer suggested the business had found the going difficult since the departure of its founders to Bank of Scotland. The sale process is expected to take up to six months.