IL&P sale collapses with another €1bn bill for taxpayers
THE Government looks set to pump another €1bn into Irish Life & Permanent (IL&P) after the sale of the life insurance unit was dramatically suspended last night.
Sources confirmed that Canada Life Ireland, which had been identified as the preferred bidder for Irish Life, had pulled out of the race to buy the life insurer after being spooked by the deepening eurozone crisis.
It is understood that the companies behind the two other remaining bids -- one from Canadian firm CVC and another joint offer from JC Flowers and Apollo -- were asked to make further offers last night but cited similar concerns to Canada Life's.
In a statement IL&P said: "The process attracted significant interest from a broad range of potential acquirers. However the current very challenging market conditions are not conducive to concluding a transaction of this size at this time and in that context the process has been suspended."
In the meantime, it is likely that the State will have to pump another €1bn into the plc before the end of the year to meet a capital deadline imposed by March's stress tests.
A spokesperson for the Department of Finance said the process had attracted significant interest but current market conditions were not 'supportive' to achiveing an outcome that recognises Irish Life's strength.
The deadline is underscored in the latest memorandum of understanding inked with the EU/IMF/ECB, which is understood to say that the Government will have to put in the cash if a sale has not been agreed by the end of the year -- something that looks like a near certainty in light of last night's development.
While other bailed-out banks like Bank of Ireland and AIB have been ordered to sell assets by the European Commission as a condition of their bailout, IL&P's sale of Irish Life was purely for capital raising reasons. As such, it is understood that the so-called troika are open to Irish Life being retained as part of IL&P if an adequate sale price cannot be achieved. IL&P may also try to reignite a mooted stock market flotation of the life insurance company next year, though ongoing market volatility could make that a challenging process.
While Irish Life Assurance attracted scores of suitors initially, the shortlist quickly narrowed to five parties. Two of those -- US insurer Unum and Delphi Financial Group -- subsequently pulled out.
Since the Irish Life sale was first signalled, the life insurance market has swung back into decline as the deepening recession and uncertainty over pensions policies combined to squeeze sales.