The trustees of TSB Bank have accepted Irish Life & Permanent's €430 million (£339 million) bid that will see the State-owned bank become part of the life assurance group.
The sale will boost the Government's coffers, with the Minister for Finance, Mr McCreevy, receiving €365.5 million from the sale. The remaining €64.5 million will be shared by 1,200 of TSB's 1,300 staff under the terms of the employee share option plan. More than 80 per cent of the staff will receive shares worth about £40,000 under the plan but will have to wait until 2003 to sell a first tranche capped at £10,000. They will be able to sell further tranches in subsequent years. Staff who joined recently will receive smaller share awards.
The acquisition is a further coup for Irish Life & Permanent as it gives it access to the bank clearing system and allows it to offer a complete banking service to customers. The enlarged group will encompass more than 4,000 employees with total assets of almost €30 billion and will become the third largest financial services group in the Republic.
Irish Life & Permanent shares rose by seven cents to €12.77 in Dublin yesterday on news of the acquisition. Market analysts are broadly positive about the move and believe it will enhance earnings. The deal will be formalised in March and is subject to approval by the Oireachtas.
Irish Life & Permanent intends to merge TSB's banking operations with its Irish Permanent subsidiary to create Permanent TSB.
Irish Permanent and TSB together have 155 branches in the Republic, many of which are near to each other. Irish Life & Permanent chief executive, Mr David Went, has stated the group intends to maintain 110 of those branches.
The 45 that overlap would be amalgamated following a review of the entire branch network and no compulsory redundancies would be sought, he said.
A cost-cutting programme is under way within Irish Permanent, resulting in branch closures and voluntary redundancies. With the two banks now to be integrated, this programme is expected to be stepped up although, with the high turnover of staff in the financial services sector, many staff are likely to be accommodated elsewhere in the group.
One of the terms of the sale sought by the TSB trustees was that there would be no compulsory redundancies. This clause is expected to be enforced for two years with TSB staff also tied in under the terms of the employee share plan.
TSB chief executive, Mr Harry Lorton, will head up the new bank as chief executive of Permanent TSB and will become an executive director of Irish Life & Permanent. Irish Permanent executive, Mr Diarmuid Bradley, will become deputy chief executive.
TSB chairman, Mr Finbarr Golden, and another trustee, Mr Barry Sheehan, will also join the Irish Life & Permanent board as non-executive directors.
Irish Life & Permanent has the biggest share of the mortgage and life and pensions market in the Republic. With the integration of TSB, it will have 25 per cent of the mortgage market, 20 per cent of the life and pensions market, 12 per cent of the savings market and 10 per cent of current accounts.
Announcing the deal yesterday, Mr Went said it had taken the first step towards creating a bank that would bring real competition to the two main banks. "It brings us much closer to our stated goal of becoming the number one provider of personal financial services in Ireland."
