Is AIB on the verge of exercising its option to buy a 24.9 per cent stake in Keppel Capital, the Singapore bank whose shares have skyrocketed in the past few months? Recent reports from Singapore have suggested that AIB may be on the verge of exercising this option although there is also speculation that another Singapore bank, OCBC, may also be eyeing up Keppel. Exercising its option would cost AIB more than €1 billion (£787 million).
AIB already has a 0.94 per cent stake in Keppel Capital - formerly Keppel Tatlee - as part of an alliance completed last August. That alliance also saw AIB invest €244 million in three-year bonds in Keppel and sell its private banking and treasury operations in Singapore to Keppel for around €30 million.
For some time now there has been strong speculation on a major reorganisation involving Keppel Corporation, which has a 37 per cent stake in Keppel Capital, the fifth-biggest bank in Singapore. This speculation suggests that Keppel Corporation - seen as the epitome of the old Singaporean economy - could unlock shareholder value by releasing some of the firms buried within the group, including Keppel Capital.
Keppel Capital shares are now trading close to three Singapore dollars (€1.9) - within 12 per cent of AIB's exercise price of 3.34 Singapore dollars a share.
This would be a major step for AIB, although it has already dipped its toe into the Singapore banking market with its equity stake and three-year bonds in Keppel. Taking that further by buying almost one-quarter of Keppel would inevitably lead to speculation that AIB would take a further step and buy out the entire operation.
Speculation on some sort of corporate move at Keppel has intensified in the past few weeks with the resignation of Keppel Capital's chief executive, Benedict Kwek Gim Song. Last February, Keppel said that it was considering offers.
If OCBC does emerge as a bidder for Keppel Capital, it is unclear what the implications are for AIB. Analysts assume that its option arrangement would still be exercisable even if a bid comes in from another bank. Expect further developments.
