Banco Santander inches closer to €3.1bn deal with AIB
European Commission ready to approve Spanish giant's acquisition of lender's Polish operations
Published 20/12/2010 | 05:00
The European Commission is expected to give its seal of approval this week to the planned €3.1bn acquisition by Spanish financial giant Banco Santander of Allied Irish Bank's Polish operations.
The decision comes as AIB is poised to be taken into virtually full state ownership, possibly this week.
The commission is due to deliver the findings of its first-stage review by Wednesday and is likely to say that it has given the green light to the purchase of Bank Zachodni WBK by Santander.
The deal, which was hammered out between embattled AIB and Santander in Sept-ember, was put on the comm-ission's fast-track "simplified procedure" for review. This means that the European Commission can declare that it has cleared an uncontroversial first-stage merger without giving any reason for its decision.
AIB owns slightly more than 70pc of Bank Zachodni WBK, with Santander forking out close to €3bn in cash for the business. Santander is also acquiring AIB's 50pc stake in BZ WBK Asset Management for an additional €150m in cash. AIB will record a €2.5bn gain from the sales.
Santander has said that the acquisition on the Polish business will generate goodwill of about €2bn for the Spanish institution.
The transaction is also expected to have a positive impact on earnings per share for Santander from the first year of ownership.
The return on investment is forecast to be about 11pc at the end of the third year, according to Santander. AIB's Polish operations are the only profitable part of its business.
Last month, Bank Zachodni WBK reported a 15pc decline in net profit to 223m zlotys (€58.5m), which was in line with analyst expectations.
Last month, AIB was instructed to raise an additional €5.3bn by the Government and the Central Bank in order to boost its core Tier 1 ratio to 14pc so that it could absorb future financial shocks. It brings the total the bank has been ordered to raise to about €13.2bn.
Excluding the roughly €3.4bn in net proceeds it will have from the sale of Bank Zachodni WBK and its 22pc stake in US bank M&T, AIB still needs to raise a total of about €9.8bn by the end of next February -- an impossible task for the institution on its own.
The Government has pledged to subscribe for the incremental capital requirement that AIB does not raise from other sources. That will leave taxpayers owning the bulk of AIB compared to the 18.6pc stake they already own.