Bank of Ireland has stepped back into the US market with the acquisition of a majority stake in the Connecticut-based Iridian Asset Management group. The bank, through its Bank of Ireland Asset Management (BIAM) subsidiary, has paid an initial $177 million (€196 million) for 61 per cent of Iridian. It has agreed to a further payment of €24 million, based on the performance of the business over the next couple of years.
The deal was announced as the bank reported a 3.4 per cent rise in pre-tax profits to €1.12 billion in the year to the end of March.
More than 10 years ago Bank of Ireland operated the largest bank in the State of New Hampshire. It purchased the First New Hampshire Bank in 1988 for $37 million, but the acquisition floundered and generated massive losses for the bank. It is now operated by Citizens Bank, which is part of Royal Bank of Scotland.
Bank of Ireland has refused to disclose Iridian's profitability citing competitive reasons, but it would have been expected to pay a substantial premium in line with other acquisitions in this sector. Based on the price paid, Iridian is currently valued at €361 million. BIAM has an option to acquire the remaining 39 per cent of Iridian in the future for the prevailing market value, raising the prospect of the total acquisition price being considerably more than $361 million.
BIAM has been searching for opportunities to expand its presence in the US fund management market for almost six years. Discussions between BIAM and Iridian begun last August.
Iridian is a relatively young company. It was founded in 1996 and currently manages assets worth €12.1 billion for its US clients which are mainly in the foundation, endowment and corporate sectors. The firm has net assets of €11 million.
Its principal owners are Mr Harold Levy and Mr David Cohen. The New York financial services company, Arnhold and S.Bleichroeder, also had a shareholding. Mr Levy, who was previously a venture captalist at Warburg Pincus and Mr Cohen who worked at WR Family Association, a company specialising in investing in bankrupt companies, will remain at Iridian.
Iridian is based just 15 miles from BIAM's US business which employs 40 staff. Iridian employs 33 people and there are no immediate plans to merge the two companies, according to BIAM chief executive, Mr Willie Cotter.
"Iridian is a respected player in the US institutional market and enjoys a strong long-term track record. Their clients have been well-served by their investment philosophy and commitment to client service and this will not change" he said yesterday.
The acquisition offers BIAM a substantial opportunity for expansion in the US. Iridian has 200 clients, while BIAM has 250 of which just eight are common to both.
Bank of Ireland was the sole bidder for Iridian. Mr Cotter said its owners had wanted to bring in a new owner to lead the next phase of its development.
Bank of Ireland group chief executive, Mr Michael Soden, said Iridian was a "perfect fit" for BIAM and will enhance its ability to generate outstanding returns for the bank's shareholders.
Bank of Ireland chief promises drastic cost cuts: page 2
