ANALYSIS: Some fund managers believe that even if Bank of Ireland fails in its bid for Abbey National it will have to remain acquisitive or risk being taken over itself, writes Siobhán Creaton
THE next couple of days will crucial for Bank of Ireland if it is to restore its credibility with the stock markets and to fend off a possible hostile takeover bid.
The leak of its approach to Abbey National more than a week ago left the bank badly damaged. We now know that the details that made their way into the public domain about its exchanges with Abbey National chairman Lord Burns were misleading and disingenuous.
Bank of Ireland insists that the details it has now presented to the markets are unchanged from those that it first asked Lord Burns to consider on September 18th.
It is a robust bid, offering Abbey National shareholders a significant premium for their shares in a deal that include a mix of Bank of Ireland shares and some cash.
When details appeared in the British media about the initial contact between the two financial institutions, the proposal was described as opportunistic and derisory, offering a "nil-premium" to shareholders.
Nearly 10 days later, Bank of Ireland has moved to correct that misinformation and to try to convince Abbey National shareholders that its board should take another look at the proposal.
It has already begun meetings with key investment institutions which, if convinced by the merits of Bank of Ireland's approach, could put pressure on Lord Burns and the other Abbey directors to open formal negotiations.
The most influential shareholders are the likes of US investment giant, Fidelity, which is one of the biggest single holders of Bank of Ireland and Abbey National shares. Basically it, together with others such as Standard Life, has the power to push this approach through to the next phase.
Some market sources suggest the large institutions have already begun to make their presence felt at Abbey National, which might explain the more considered statement that emerged from it yesterday.
Abbey National shareholders are getting used to the bank rejecting proposed takeovers, but Bank of Ireland will be hoping that they will now be upset to learn that a substantial offer was dismissed so lightly by its board.
The former building society is still viewed as being poorly managed and Mr Soden and his team will be determined to impress upon the institutions the management skills they could bring to the company.
Sentiment towards the deal has improved amongst most of the institutions who have now met Mr Soden. They appear to accept that the bank is very serious about this, are more reassured about its strategy and are prepared to wait and see how he is received by the British fund managers in the days ahead.
Few would rate its chances of success at over 40 per cent at this stage, given Abbey National's refusal to engage them so far.
The bank would also find it difficult to secure more than 80 per cent approval for the takeover given the diverse shareholder base at Abbey, which has a large number of small shareholders.
Abbey National may be waiting for Bank of Ireland to sweeten its offer, although it will have to be careful not to dilute the benefits to its own shareholders in doing so.
Some fund managers believe that even if Bank of Ireland fails in its bid for Abbey National it will have to remain acquisitive or risk being taken over itself. "It can't stand still now" according to one.
