Icelandic bank Landsbanki is drawing back from the race for the Irish Nationwide Building Society only six weeks before its managing director, Michael Fingleton, must retire from its board when he turns 70.
Having considered itself a frontrunner to acquire Nationwide in the early part of the bidding process, Landsbanki's interest in the building society is said to have cooled considerably in recent days.
The bank is concerned about the downturn in the Irish property market given the exposure of Nationwide's commercial loan book to that sector.
It has also become frustrated at the volume and type of information Nationwide has provided, and the pace at which the information has been made available to it.
Landsbanki now believes that Nationwide's expectation of the price it will accept for the business to be unrealistic given the continuing credit squeeze and the sharp fall in the value of Irish financial stocks.
Financial shares in Dublin are down around 40 per cent since the start of the year. For prospective buyers, this has driven down the price of the building society to the low end of the €1 billion to €1.5 billion scale at which it has been valued, well below the society's expectations.
It was unclear late yesterday whether Landsbanki had formally withdrawn from the process or whether it would revive its interest if the asking price for the building society is reduced.
There was no comment from Irish Nationwide.
About 120,000 qualifying members of the society stand to receive a long-awaited windfall of more than €10,000 each whenever it demutualises.
While legislation to facilitate the sale was passed by the Oireachtas in July 2006, the sale process only started in earnest in recent months.
Mr Fingleton will stay on as managing director after January if the sale is not concluded by January 26th, when he is obliged under the society's rules to retire from its board. However, his departure from the board has potential to reduce his influence over the process.
Landsbanki, which bought out Dublin stockbroker Merrion Capital two years ago, is the second major bidder to scale back its interest in Nationwide.
Bank of Scotland (Ireland) and private equity fund Quinlan Private took a serious look at the business but their interest diminished considerably after it became public last September.
Other contenders include US private equity firm JC Flowers, which teamed up with Icelandic bank Kaupthing, as well as German investment bank Hypo Real Estate and US lender GE Money.
