Bank of Ireland and Irish Life & Permanent will face stiff competition if they go ahead with a joint bid for Ulster Bank next week with institutions from Britain, Europe and the US understood to be also expressing an interest in acquiring the bank.
Among the Irish financial institutions, Bank of Ireland and Irish Life & Permanent are the only ones to confirm their interest ahead of the November 11th deadline. Others, such as AIB, the Belgian-owned Irish Intercontinental Bank and National Australia Bank, which owns National Irish Bank and Northern Bank, may also opt to make a bid. It is understood, however, that so far NAB has not expressed an interest in Ulster.
AIB is believed likely to examine closely whether to bid for Ulster. As the Republic's largest bank and a significant player in the North, it would be likely to face a competition investigation if it tried to take over Ulster. Some bankers believe, however, that a strategic review of the industry promised by the Minister for Finance, Mr McCreevy, could mean a recognition by Government of the need for domestic banks to build significant scale to be able to compete internationally. The Minister said this week that Irish banks were small by international standards and this should be examined.
Informed sources suggest NatWest could get up to 10 indicative bids for Ulster Bank from a wide range of institutions. The Dutch banking group ABN Amro is likely to look closely at Ulster Bank's Irish operations while several British and US banks have also requested an information memorandum from NatWest's advisers, Dresdner Kleinwort Benson.
The advisers refuse to rule any option out at the moment including floating Ulster Bank as a separate company on the London and Dublin markets, if they fail to attract substantial bids during the sale process. Most analysts believe a flotation is unlikely as a sale would realise cash fairly quickly for the besieged bank which wants the funds to fend off a hostile bid from Bank of Scotland.
A decision on which bid is the most acceptable could be made within the next couple of weeks as Dresdner Kleinwort Benson is due to present its second defence document to the bank by November 22nd. This will include recommendations on the best way for the bank to proceed.
Dresdner Kleinwort Benson is charged with realising the maximum value for NatWest shareholders through the Ulster Bank sale and will consider either selling the entire operation or breaking it up into parts, depending on which strategy will raise most money.
Ulster Bank is estimated to be worth £2 billion (€2.54 billion) to £2.5 billion. Its retail branch network which stretches between the Republic and the North would be of most interest to Irish Life & Permanent and Bank of Ireland. It is valued at £1.5 billion. The bank's operations also include a corporate and investment unit worth around £400 million, Ulster Bank Investment Managers, valued at £90 million, and NCB Stockbrokers which could be worth up to £30 million.
Bank of Ireland and Irish Life & Permanent have issued statements to the stock exchange confirming their discussions which may result in a joint bid. Bank of Ireland is interested in buying Ulster Bank's Northern Ireland retail operations while Irish Life & Permanent wants to acquire its branch network in the Republic.
In considering the bids Dresdner Kleinwort Benson will have to take account of the fact that a bid from some of the Irish institutions may not be straightforward, as it may have to be referred to the Competition Authority.
