Bank of Ireland will become the unchallenged number two in the Irish life assurance and pensions market when its £273.6 million takeover of New Ireland Assurance is completed. The takeover is the second major acquisition involving an Irish-based but French-controlled company in the space of a few weeks, following GE Capital's recommended £591 million offer for the Credit Lyonnais-controlled Woodchester Investments.

The acquisitions are expected to fuel speculation of more rationalisation in the financial services industry and Anglo Irish Bank is now seen as possibly the next to receive a takeover bid.

Irish Permanent is also a possible target, once its five-year takeover-free period expires.

It is understood that Bank of Ireland beat off stiff competition from Irish Life and Irish Permanent for New Ireland.

While New Ireland would not give any details of the size of the competing bids, informed sources said "there were a number of keen near-bids but Bank of Ireland's bid was the highest".

It is also understood that New Ireland's main shareholder - SunLife & Provincial, part of AXA-UAP - was keen to avoid the danger of falling foul of Ireland's competition regulations. Fear of a delay for months caused by a monopolies investigation is thought to have weighed against an Irish Life bid, even if Irish Life had made the highest bid. "AXA wanted a clean bid," said one source.

Earlier this year, New Ireland sold off its general insurance subsidiary, Irish National Insurance, to Eagle Star for £30 million.

Officially, New Ireland has entered into exclusive discussions with Bank of Ireland on a cash offer for the company at £23.82 per share.

But with the 83 per cent shareholder, SunLife & Provincial, giving an irrevocable undertaking to accept the Bank of Ireland offer and with New Ireland giving the board its seal of approval, completion of the takeover is a matter of course.

The minority shareholders, most of whom have been on the New Ireland share register for some time, stand to get a £47 million windfall.

Most of this money, together with the £270 million received by Woodchester's minority shareholders, is likely to find its way back into the Irish stock market. The two biggest minority interests with a disclosable shareholding are Friends Provident, which has 4.6 per cent and the ESB Superannuation Fund with 3.04 per cent.

While the £23.82 a share offer is a 19 per cent premium on the previous New Ireland closing price of £20, it is a huge increase on the price of New Ireland shares over the past few years.

Until the beginning of 1996, New Ireland shares had been trading at no higher than 600p, and it was only speculation on a sale by SunLife & Provincial that had sent the shares spiralling upwards over the past year and a half.

Since the beginning of this year, the shares had risen from 950p to £20 before yesterday's £23.82-ashare bid from Bank of Ireland.

While this might suggest that Bank of Ireland was paying a high price for New Ireland, analysts in Dublin said the multiple of 1.4 times embedded value, indicated by the £273.6 million price tag, was in line with recent takeovers in the British life assurance industry.

"It looks a reasonable price," said NCB analyst, Mr Shane Nolan.

The one minor surprise of yesterday's confirmation of the Bank of Ireland bid was that the bank opted to raise £199 million in a share placing to maintain its capital ratios at acceptable levels.

The placing of 23.5 million shares at 846 1/2p each, however, represents less than 5 per cent of the number of shares in issue and it is significant that despite the dilutionary impact of the placing, Bank of Ireland shares were trading up to 890p on the Dublin market yesterday.

Prior to the placing, Bank of Ireland was forecast to have a March Tier One capital ratio of 7.2 per cent. Analysts said that had Bank of Ireland not raised additional equity to boosts its capital ratios, the Tier One ratio would have fallen to nearly 6 per cent - still well in excess of Bank of International Settlements requirements. Bank of Ireland chief executive, Mr Maurice Keane said, however: "The Tier One was not a problem but, without the placing, our equity-to-assets ratio would have been a bit tight."