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UK-Irish bank talks end
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June 17, 1999: 8:17 a.m. ET
Alliance & Leicester, Bank of Ireland fail to complete $8.2B tie
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LONDON (CNNfn) - A merger aimed at creating Britain's eighth-largest banking group has collapsed in disarray after Alliance & Leicester ended its 5.1 billion-pound ($8.2 billion) merger talks with Bank of Ireland.
Terse statements from both companies announcing the end of takeover talks were released late Wednesday.
A&L blamed BOI for the split, saying the Irish company progressively introduced a stream of new demands to their negotiations, effectively making the deal a takeover by BOI rather than the supposed merger of equals. However, BOI maintained it was differences in management style which ended the talks.
The original terms of the deal "are no longer acceptable to the directors of the Bank of Ireland," said A&L Chairman John Windeler in a statement.
"Usually, when mergers fail, egos are involved," said David Liston, banking analyst at Capel Cure Sharp.
Reported comments from BOI sources indicated that Peter White, A&L's chief executive, was one of the stumbling blocks to a deal, having failed to impress the Irish bank's board of directors.
Shareholders on both sides of the Irish Sea appeared to welcome the decision to end talks. A&L stock jumped almost 4 percent to 908 pence in London Thursday, while BOI shares gained 4 percent to 1,119 pence.
Shares in both companies had fallen since talks were first revealed, as investors began to ponder the benefits of the proposed merger.
Deals may still lie ahead
The breakdown in merger talks doesn't mean no deal is in the offing. Lloyds TSB (LLOY), the world's fourth-largest bank in terms of market capitalization, was forced to deny Thursday that it is interested in bidding for A&L.
"A&L is obviously looking for some tie-up to secure its long-term future," said Liston, "but it's much more difficult to see how that will be achieved."
A&L, which converted from mutual status in 1997, is protected by regulators from a hostile takeover until 2002, although it is free to negotiate mergers. However, analysts said that protection may not amount to much. "They would have to put a knockout bid to shareholders, and if 75 percent voted in favor" the deal could go through, said Sharp's Liston.
For BOI the situation is very different. It is benefiting from its exposure to the booming Irish economy as well as the very low interest rates prevailing in euro-zone countries.
"BOI needs an acquisition to maintain its growth," said Liston, "but where does it go from here?" he asked.
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