SENIOR executives of Bank of Ireland and Bristol & West Building Society have worked throughout the weekend on the finale terms of an offer which the building society can recommend to its members. A joint statement is expected to be made shortly after the markets open this morning.
Both parties have maintained a strict silence over the weekend, but industry sources believe that Bank of Ireland will offer around £600 million sterling for the building society, an offer that would provide windfall gains of lover £750 each for the building society's qualifying members.
Bristol & West has not being taking any new business since last Thursday with the aim of preventing speculators investing on the basis of the windfall gains. Bristol & West, which holds its a.g.m. later this week, is understood to be keen to make an announcement as soon as possible, so it can reopen for new deposits and mortgage business.
A Bristol & West spokesman has already told The Irish Times; that a takeover that would allow the society to continue as a specialist deposit taker and mortgage lender is favoured.
It is understood that Bristol & West favours a takeover by an overseas bank, as a takeover by a big British bank or building society might simply result in Bristol & West's deposits and mortgage base being cannibalised.
The general view among Irish analysts is that £600 million sterling - a multiple of 1.75 times Bristol & West's book value - is a reasonable price for a medium ranked building society.
One key aspect of the acquisition is the exposure it will give Bank of Ireland to the retail deposits market in the market in Britain. Currently, Bank of Ireland's BIHM subsidiary funds its mortgage business in Britain from the wholesale money market - an expensive source of funds when interest rates are low.
There will be keen interest in how the bank intends to fund the expected acquisition of Bristol & West. The bank currently has a strong balance sheet and could fund a £600 million purchase from its own resources, although this would push Bank of Ireland's Tier One capital ratio down from 8.8 per cent to 5.2 per cent.
The Tier One ratio to 5.8 per cent once the merger of Bank of Ireland's First NH subsidiary with Royal Bank of Scotland's Citizens Financial subsidiary is completed in the next couple of months.
