EMBATTLED AIB is offloading its 22.5pc stake in US bank M&T through an institutional placement, in a deal that could net the soon-to-be-nationalised institution more than €1bn.
News of the transaction was announced late last night, after markets closed in the US. In a statement, AIB said it was planning to offer its shares in M&T to the open market in a deal to be co-ordinated by Morgan Stanley and Citigroup.
The shares can't officially be sold until the disposal is sanctioned by AIB's shareholders, so Morgan Stanley and Citigroup will instead sell investors 'notes', which can be exchanged for M&T shares once the deal has been approved by the shareholders.
A price will emerge once Morgan Stanley and Citigroup get a feeling for what investors are willing to pay, sources said last night. Analysts are expecting AIB to make more than €1bn from the sale.
Once the deal is completed, AIB will be a step closer to delivering the €10.4bn capital target set by the Financial Regulator last week, but nationalisation is still believed to be unavoidable.
AIB has been exploring options to dispose of its M&T stake since March, when the Financial Regulator set the bank an initial capital target of €7.4bn to be met by the end of the year.
The Irish bank was initially expected to sell its 22.5pc stake in M&T to a trade player, with Spanish banking giant Santander believed to be the most likely suitor.
Those hopes were dashed last week after reports cited the Spanish bank's chief executive as claiming talks had broken down, prompting AIB to opt for a private placement.
Analysts expect AIB to secure a capital boost of more than €1bn by selling the M&T stake.
The bank has already agreed to sell its Polish operations to Santander in a deal that generated a capital boost of more than €2.5bn for AIB.
Even after selling both M&T and Santander, the bank has almost €7bn left to raise. The bank hopes to make up another €1.4bn by selling its UK operations and "smaller" assets.
A €5.5bn equity raise has been pencilled in for November, with the State guaranteeing to buy any shares not taken by private investors.
The State's stake is expected to rise to more than 92pc if there is no private investment in the placement.
AIB's relationship with M&T stretches back almost eight years, when the AIB agreed to sell the US bank its scandal-ridden Allfirst Financial.
The Michael Buckley-led AIB gained a 22.5pc stake in the merged entity, while M&T's management took the lead and grew the business into a substantial force in the US regional banking market.
The latest results from M&T show a 269pc surge in profits in the quarter to June, as the bank booked net income of $189m amid net interest margins and lower loan losses.
Earlier in the day, AIB announced that M&T boss Robert Wilmer was stepping down from the Irish bank's board. Another non-executive director, Robert Crowley, has also resigned from the board.
The resignations come less than a week after Finance Minister Brian Lenihan promised sweeping reforms of AIB's board, as managing director Colm Doherty and executive chairman Dan O'Connor agreed to step down.
A spokesman for the Department of Finance last night referred all queries to the NTMA. A spokesman for the agency said it had "no comment" to make.