Tycoon eyeing up BoI's €1bn business in UK
Entrepreneur targets merger of several lenders
Sunday July 06 2008
CLIVE Cowdery, the British entrepreneur who sold insurance firm Resolution for over €6bn last month, is targeting Bank of Ireland's €1bn-plus valued Bristol & West arm as part of a major land grab in the UK financial sector.
A source close to Mr Cowdery told the Sunday Independent the financier and his advisers, US investment bank Lazard, have drawn up a list of potential targets in the ailing UK mortgage market.
"Bristol & West is one that would fall into that category, with a potentially subscale mortgage book. It may be possible that it could be divested," according to the source.
It is understood Mr Cowdery and his backers plan to take advantage of the global economic meltdown and buy up several smaller UK mortgage lenders and combine them into a larger player with a better credit rating.
Banks and building societies are now far more likely to consider selling off non-core assets as they try to rebuild their battered balance sheets and improve their financial health.
"There are about 15 potential businesses. The plan would be to merge three large ones or maybe five smaller ones, with a targeted return in the mid to high teens," according to the source.
Along with Bank of Ireland Bristol & West, Alliance & Leicester, Paragon and GMAC's UK mortgage business have also been targeted.
Bristol & West, which serves the riskier buy-to-let sector, would be a big mouthful for any predator. It accounts for about €22bn of Bank of Ireland's €34bn UK mortgage book.
The company generated pre-tax profits of about €207m last year, which would give it a price tag of between €800m to €1.4bn. However, the annihilation in the stock markets and crumbling housing sector makes it more likely any bid could be much lower.
Compared with many of its rivals, Bank of Ireland is in reasonable shape. It does not need to sell Bristol & West, although it may consider selling out before the British market gets any worse.
"I don't think they'd sell it for these implied valuations by the market," said Merrion analyst Sebastian Orsi.
Mr Cowdery and his advisers are understood to have made approaches to a number of smaller banks and building societies. It is thought Bank of Ireland has not yet been contacted. However, this is likely to happen in September.
A Bank of Ireland spokeswoman said the bank did not comment on speculation.
Bank of Ireland bought the Bristol & West building society in a €750m deal in 1997. It sold the branch network and and deposit book to Britannia in a €210m deal in 2005.
Bristol & West mortgage products are sold through intermediaries.
Two weeks ago, Mr Cowdery failed in an attempt to buy into ailing British mortgage bank Bradford & Bingley, which instead sold a stake to private equity giant Texas Pacific Group.
It is understood Mr Cowdery is to raise close to €2.5bn from investors in September to fund purchases. It's likely he will tap up the same US and UK institutions which backed his Resolution business.
Fears over increasing bad debts and a cut in earnings forecasts saw Bank of Ireland's shares fall to their lowest level in 12 years last week. The share price has dropped from €18.62 to just €5.18 in just over a year.
- Nick Webb
