Sunday 23 November 2014

Rabobank set to buy ACC Bank

Cyril Hardiman

Published 25/10/2001 | 00:11

DUTCH co-operative bank Rabobank Nederland looks set to buy State-owned ACC Bank as the first step in strategic expansion of its retail banking model outside Holland. ACC confirmed yesterday that it was entering "sale contract negotiations" with the Dutch group, a leader in international food and agri-business banking. Rabobank has already carried out due diligence on ACC.

DUTCH co-operative bank Rabobank Nederland looks set to buy State-owned ACC Bank as the first step in strategic expansion of its retail banking model outside Holland.

ACC confirmed yesterday that it was entering "sale contract negotiations" with the Dutch group, a leader in international food and agri-business banking.

Rabobank has already carried out due diligence on ACC.

Part of the final negotiations will involve setting up an employee share ownership plan, giving them 14.9pc of the agreed valuation.

The price has not been disclosed, but banking sources said yesterday they would be surprised the Department of Finance had managed to get more than book value for the bank, suggesting a price tag of perhaps no more than £150m.

Labour's finance spokesman Derek McDowell, whose Dáil question on the sale process probably sparked yesterday's brief announcement, believed the timing of the disposal was not good to the Government.

"Timing is my concern... I suspect the Minister will get less today than he would, in say, two years time".

Mr McDowell was alluding to the changed economic circumstances and the slump on world stock markets which have reduced valuations of banks and, consequently, takeover multiples.

Fergus Murphy, managing director of Rabobank's capital markets/wholesale banking operation in the IFSC, explained that the group had proven itself in Holland where it has about 40pc of key retail banking sectors such as mortgages, savings etc.

"There is now a desire strategically to expand that profile outside Holland".

He said the bank was "looking at other opportunities around Europe this is just one of them".

He added that the Irish economy was attractive. The fact that the penetration of the top banks was lower here than in the Netherlands also presented expansion opportunities for a revamped ACC augmented by Rabobank retail products.

On the possible sale value, previous State asset sales probably give little guidance.

TSB Bank was sold to Irish Life & Permanent for around 1.8 times book value or net assets, while ICC Bank was acquired by Bank of Scotland for a slightly lower multiple.

Both these banks were highly profitable and unburdened by the kind of baggage ACC has been carrying.

It had to absorb a huge DIRT penalty, write-offs in respect of previous poor lending, and has a generally weak trading track record.

ACC's book value was 167m (£132m) at the end of last year. Net assets were depressed by net losses due to non-operating write-offs for the bank's DIRT settlement, bad debts and employee restructuring.

Up-to-date book value is probably a bit higher, but it is still hard to see Rabobank paying a premium, particularly given the changed conditions.

Rabobank was founded 100 years ago as a co-operative agricultural bank.

Today, it ranks among the world's top 50 financial institutions with world leadership in virtually all food and agribusiness markets.

It ranks first in savings, mortgages, agri-business and SME banking in Holland.

Both banks clearly share an agrarian heritage, but the fact that ACC could not entice any local banks to bid makes this move slightly curious.

Obviously Rabobank believes its products and way of doing business will be sufficient to make an impression in the Irish market.

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