AIB expects to finalise its deal to take a 22.5 per cent stake in the New York-based M&T bank in March 2003 now that its shareholders have approved the merger of its Allfirst subsidiary with the New York bank.
AIB shareholders overwhelmingly sanctioned the transaction at an extraordinary general meeting in Dublin yesterday. Once it is passed by the various regulatory authorities, AIB shareholders will have a significant interest in one of the top performing US banks.
Addressing the meeting, AIB chairman Mr Lochlann Quinn said the bank had spoken to up to six potential partners and had ended up concluding a deal with M&T, its preferred choice.
At a three-day board meeting last year, the directors decided to look for a US partner to merge its Allfirst subsidiary in Baltimore with, he told the meeting. They drew up a shortlist of six financial institutions and held discussions for three to four weeks with two of them before reaching agreement with M&T. "We are buying into a company with a fantastic track record. It will transform our interests in the US and will transform M&T," Mr Quinn told shareholders.
The bank has said that it had entered merger talks before the $691.2 million (€673.5 million) fraud at Allfirst was announced in February. Its star foreign currency trader, John Rusnak, had incurred this huge loss by gambling on the foreign currency markets and was subsequently convicted of fraud.
The discussions with M&T were suspended while the damage he caused was assessed with AIB's senior management team focused on restoring investor confidence. Many of the bank's large institutional investors had given the bank one year to restructure Allfirst and prepare it for sale.
AIB and M&T shareholders have now approved the issuance of 26.7 million M&T shares to the Republic's biggest bank and the payment of $886 million (€864.2 million) to AIB in exchange for all of the stock of Allfirst. The deal has a total value of $3.1 billion.
Under its terms, M&T chairman, president and chief executive, Mr Robert Wilmers, will joint the AIB board while AIB will designate four directors to the enlarged M&T board, including chief executive, Mr Michael Buckley. Mr Eugene Sheehy, currently chairman and president of Allfirst, will also join the board and will become chairman and chief executive of the Maryland and Pennsylvania regions. He will also join the bank's executive management committee.
Allfirst will be renamed M&T and while there is unlikely to be widescale branch closures, because there is a very small overlap between the two banks, there will be hundreds more redundancies, particularly with the merger of the two head offices.
Mr Quinn said the details involved had yet to be finalised.Some 350 people are already scheduled to leave Allfirst as part of a voluntary severance scheme. Mr Quinn said there were likely to be more job losses as a result of the deal.
The banks have targeted cost savings of $100 million as a result of the merger, $60 million of which will be delivered next year. Mr Quinn said most of these savings would come from staff at both banks. It could take two or more years to complete the integration, Mr Quinn said.
By buying Allfirst M&T will expand substantially to control 700 offices in New York, Pennsylvania, Maryland, Virginia, West Virginia, Delaware and Washington DC.
