THE public confirmation that Allied Irish Banks had discussions with Mr Andrew Regan's Galileo group may have dealt a serious blow to the bank's hopes of acquiring Co-operative Bank, if the current raft of injunctions results in the Galileo bid being frustrated.
Over the weekend, AIB confirmed that there have been discussions between the bank and Galileo on an acquisition of Co-operative Bank, if Mr Regan's hostile bid for the Co-operative Wholesale Society was successful. AIB, however, was at pains to stress that no deal on the Co-op Bank had been done with Mr Regan or Galileo, and that no deal on a £300 million takeover of the bank was close to completion.
There are also strong indications that, conscious of the circumstances that led to Lanica Trust, Mr Regan's investment vehicle, being injuncted from making its proposals to acquire CWS known, AIB is now distancing itself from Lanica - at least until the current legal actions are completed.
If Lanica is successful in overturning the injunctions granted yesterday and its takeover bid for CWS proceeds, then sources believe that AIB would be happy to resume discussions with Lanica on the Co-operative Bank. If, however, Lanica is permanently frustrated from making a bid, sources believe that AIB would want to make itself available as an acceptable buyer of Co-operative Bank to any other group which comes into buy CWS. Other prospective buyers, however, have now been alerted to AIB's intentions and could lodge counter-bids.
Whether AIB would be an acceptable buyer of Co-operative Bank to CWS in such a situation is open to question, however, given AIB's discussions with Lanica Trust.
Most analysts are agreed, however, that Co-operative Bank would be an ideal acquisition for AIB.
Co-operative Bank is a well-run offshoot of CWS and has a strong regional franchise in the north-west of England. The bank has substantial in-store banking operations through its links with the Co-op, also owned by CWS, and has a substantial credit card business. The bank had profits of £45 million last year.
As regards price, analysts believe that £300 million is probably as much as the British bank is worth, based on a multiple of around 2.3 times book value - the upper end of the range of banking acquisitions in the UK in recent times.
With £840 million to be spent on the Dauphin Deposit Corporation and a further £47 million spent on WBK Bank in Poland, £300 million on Co-operative Bank could mean that AIB's capital ratios could become stretched.
