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Bank bosses scramble after merger collapses

February 16, 2011

By Staff Reporter

By Andrew Bushe

DUBLIN — Beleaguered Bank of Ireland bosses are seeking to reassure investors after the collapse of merger talks with the British Alliance & Leicester has left their share price in the doldrums and raised questions about the strategic management of the country’s second biggest bank.

Immediately after details of the possible merger deal were leaked last month, BofI’s shares surged. But the shareholder approval was short-lived. As the implications of the deal sank in the shares slumped by about 20 percent.

When the negotiations collapsed, the shares rebounded about 7 percent and then fell back again amid uncertainty about what the BofI would do now and the implications for the credibility of the management team that backed the deal.

When the banks’ court or board face an AGM next month, they are expected to come under strong pressure to reveal more details about the debacle despite confidentiality agreements.

The announcement the deal was scuppered came from the British side with A&L, claiming that BofI had sought to change previously agreed link-up issues.

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An A&L spokesman accused BofI of requesting "changes to key items which had previously been agreed."

BofI said it "could not be confident that the merger would deliver its full benefits."

The banks began merger talks on May 24. If the merger had gone ahead, the combined £13 billion group would have been the biggest bank in Ireland and the eighth largest bank in Britain.

The negotiations follow months of speculation that BofI, AIB and the merged Irish Permanent/Irish Life could be takeover targets and the collapse of the BofI share prices and the merger has increased

speculation that a predator may strike.

The merger talks had involved a new structure where both companies would retain their separate stock market listing.

In a statement following last month’s leak, they said the new group would be well positioned to pursue "further opportunities resulting from consolidation in the financial services sector."

Before the deal soured, the erstwhile partners had anticipated total annual pre-tax cost and revenue benefits of £236 million if the merger had gone ahead.

The link up would have been one of Europe’s largest cross-border banking deals and involve the first link between euro and sterling banking operations since the single currency was set up on Jan. 1.

But analysts felt BofI chief executive Maurice Keane, 57, and his team had conceded too much and they will now have to reassure major institutional investors about possible alternatives acquisitions.

BofI had made no secret of the fact that they were looking at expansion in Britain to consolidate the bridgehead acquired in 1997 with the purchase of purchase of mortgage company Bristol and West.

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