Norwich Union will today invite the three Irish mutual building societies and the Bank of Ireland-owned ICS to make bids for the Norwich Union Building Society. Some 9,500 saver members of the mutual society will share payments of about £1.2 million to £1.7 million if a transfer of the business of the mutual society is agreed.

Members will have to approve any change. A special general meeting is expected to be held early next year. Only qualifying saving members - those with share savings accounts which have maintained a minimum balance of £100 from July 1st, 1997 until the date of the special general meeting - are entitled to vote on the change and only these members will receive the bonus payment.

The payment is expected to be between 1 per cent and 1.5 per cent of the balance in their savings accounts at September 29th, 1997. Because the proposal is a "transfer of engagements" rather than a conversion, which was ruled out because the society is so small, mortgage holders are not entitled to vote and will not qualify for any bonus payment.

The directors of the mutual society, which is owned by its members but managed by the Norwich Union Ireland, wrote to members yesterday informing them that they were considering the options for its long-term future.

This follows the examination by the Norwich Union board of a report from corporate finance advisers, Price Waterhouse on the future options for the building society.

First National, EBS, Irish Nationwide and the ICS will be invited today to make proposals for the take-over of the business of the building society. Norwich Union Building Society is a small mutual building society with a mortgage book of £83 million and deposits of £115 million. It has reserves of £6.8 million and produced pre-tax profits of £403,000 for 1996. The society has 32 employees but has only one branch building in Dublin. It operates out of Norwich Union group branch offices and pays the Norwich Union group an annual fee for fund management, information technology, branch space and central personnel functions. The fee was £1.8 million last year.

The business is expected to be attractive to all the potential bidders. What is on offer is a book of business and the staff who conduct the business without a branch structure. There is no branch structure, technology or head office structure so the business could be slotted neatly into an existing building society operation.

Current trading "remains very satisfactory and a material increase in revenue surplus is projected for the current year", according to chairman, Mr Joe McCabe. The society was set up in 1974.

The reason for the announcement was "the potential problems facing a small building society in the longer term". Reducing margins would make it increasingly difficult for a small society to maintain adequate levels of growth to remain both efficient and competitive.

The Price Waterhouse report confirmed the board's view that the society "might not have a viable long term future as an independent building society".