Sunday 23 July 2017

Desmond out of race for AIB's €8.5bn fund business

Dermot Desmond: Out of the race to buy AIB Investment Managers. Photo: Tom Burke
Dermot Desmond: Out of the race to buy AIB Investment Managers. Photo: Tom Burke

Emmet Oliver Deputy Business Editor

The race to buy AIB's investment arm has been thrown wide open after financier Dermot Desmond pulled out of the race, leaving Irish Life & Permanent (IL&P) and a late UK bid in the lead position.

AIB Investment Managers (AIBIM), which manages €8.5bn of assets, had attracted attention from several bidders, but questions have arisen over whether AIB's own staff pension fund will continue to be managed by AIBIM and included in the sale.

It is understood trustees of this pension fund have been in contact with the bidders, outlining to them the kind of relationship the fund could have with AIBIM in future.

But it has emerged that Mr Desmond's IIU is no longer pursuing the company, but interest from another bidder Bloxham Stockbrokers and Bellevue, an asset manager, remains.

A late bidder, a well-established UK pension fund, has submitted a bid with a figure on the table of between €10m and €15m.

It can close the transaction within two weeks, it is understood. This group's offer is not conditional on the staff pension being included, hence the lower price.

It has long-standing business links with Legal & General, which works closely with AIBIM distributing investment produces to investors in Ireland.

Bidders

Corporate finance sources were reacting to the news last night and while a reduction in bidders is likely to drive the price down, the actual sale process is speeding up and a conclusion could be reached within weeks, sources said.

IL&P, which has its own investment arm, Irish Life Investment Managers, would be an obvious candidate to purchase AIBIM, but it is understood IL&P, while still interested, does regard it as not essential to its future strategy.

AIB is selling the asset as part of a programme of disposals needed to generated badly needed capital for Ireland's second largest bank.

According to the last annual financial statements issued by AIB, the staff pension fund has assets of almost €2.9bn.

The sale is being handled by Goodbody Stockbrokers, which used to be owned by AIB, but is now in the ownership of Kerry-based Fexco.

AIBIM is being offloaded after AIB ditched other assets to generate capital, including a stake in US lender M&T and a Polish business known as Bank Zachodni.

Even with these sales, the bank is still short of a capital target required by regulators.

By the end of February, the Central Bank must direct AIB to achieve a new target of 12pc core Tier 1 capital.

This is part of a process of trying to "overcapitalise'' the bank, which is still weighted down with impaired assets.

This has now been slightly delayed by an announcement yesterday by Finance Minister Brian Lenihan.

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