Irish Permanent and Irish Life have agreed the terms of a £2.8 billion merger which will create the third largest financial services group in the State.

The new company will be renamed Irish Life & Permanent but the businesses will continue to use the existing Irish Permanent and Irish Life brand names.

The merger, the largest in Irish corporate history, is not expected to lead to significant job losses, with just under 100 jobs out of a total of more than 3,700 being affected. The two companies said they hoped to reduce the impact of any staff reductions by implementing them through normal staff turnover or redeployment.

The merger must be approved by the Central Bank, the Minister for Enterprise, Trade and Employment, and Irish Permanent shareholders but the two firms said they were confident it would be completed by the end of April next year.

Irish Life shareholders can expect to receive details of the merger offer in January. The new board will include an equal number of representatives from both companies. Mr David Went, who is currently managing director of Irish Life, will become chief executive of the new group and Irish Permanent's chief executive, Mr Roy Douglas, will be chairman-elect with special responsibility for implementation of the merger. He will become sole non-executive chairman in May 2000, when the joint chairmen, Mr Conor McCarthy and Mr John Bourke, step down.

Irish Permanent's finance director, Mr Peter Fitzpatrick, and its manager of retail banking, Mr Billy Kane, will join the board as executive directors, along with Mr Brian McConnell, chief operating officer at Irish Life, and Mr Kevin Murphy, Irish Life's head of investment.

Mr Kieran McGowan, who will shortly stand down as chief executive of IDA Ireland, will also be appointed to the board as a non-executive director.

Because of legislation preventing the take-over of building societies for five years after flotation, Irish Permanent will make an offer for the larger Irish Life. Irish Permanent shareholders will own 32.7 per cent of the new company, while Irish Life shareholders will hold the remaining 67.3 per cent.

This reflects the recent market capitalisation of both companies and means there is no premium for either side. Each Irish Life shareholder will receive 60.85 shares in the new company for every 100 shares held, if the deal is approved. As part of the merger, the Minister for Finance has also relinquished his "golden share" in Irish Life, held since the company floated in 1991, while the ban on any single shareholder owning more than 15 per cent of the company has been lifted.

"The merger will create a powerful new force in the Irish personal financial services market by enhancing the already strong market positions of each group," Irish Life chairman Mr McCarthy said.

Joining the two companies will create opportunities to grow revenues but it should also lead to cost savings worth at least £12 million in a full year. These will come from the amalgamation of Irish Progressive, Irish Permanent's life assurance arm, with Irish Life's life assurance operations, the combination of the two sets of head office functions and the benefits of economies of scale in purchasing. In addition, the consolidation of information technology operations and the enlarged group's ability to raise finance on more efficient terms will cut costs. However, there will be a one-off cost of £6 million to achieve these savings and this will be provided for in the new company's accounts for the year ending December 31st, 1999.

The fate of some of Irish Life's associated companies - such as Irish Life Finance Group and Irish Intercontinental Bank - remains uncertain because of overlaps with Irish Permanent's business. Irish Life is currently in discussions with Kredietbank, its joint venture partner in these businesses, as to their future strategy and ownership. However, Mr Went declined to comment on the likely outcome, other than to say that the talks were preliminary and "warm and friendly".

He also said Irish Life's British and US operations would remain an important part of the new group but it had no plans to develop a presence in Europe outside of its existing operations. Instead, its focus would be on Ireland where Irish Permanent retained a keen interest in acquiring ICC Bank.