State’s AIB share sale moves closer with advisory move

The Government has moved a step closer to the sale of AIB shares by preparing to appoint investment banks to assist in a future stock-market listing of shares.

The Department of Finance has announced plans to run a tender among 12 investment banks and stockbrokers who are on an existing advisory panel.

The capital markets panel comprises Bank of America Merrill Lynch, Barclays, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan, Nomura, UBS and Irish stockbrokers Davy, Goodbody and Investec.

The selected groups will assist the State with early-stage preparations for an initial public offering (IPO) and will be appointed for an 18-month period providing the State with “optionality” through 2017 and well into 2018.

They will work on a no-foal-no-fee basis. This means they will not get paid unless a transaction occurs.

If the Government decides to press the button on an IPO, a wider banking syndicate will be appointed to move preparations forward.

The Government would be expected to sell at least 25 per cent of AIB initially, which could raise up to €3 billion based on the €12.2 billion valuation placed on the State’s holding in AIB at the end of last year.

The proceeds would be used to repay some of the national debt.

Weak markets

The Government had originally intended to float AIB shares this year but scrapped this plan due to weak capital markets, particularly for bank stocks.

A six-month build-up to an IPO would be expected, during which AIB would be required to prepare the extensive documentation necessary for a listing, and to conduct roadshows with potential institutional investors around the world.

Commenting on the tender process, Minister for Finance Michael Noonan said: “My officials have commenced a competition process to procure joint global co-ordinators to enable a potential initial public offering of shares in AIB to the market.

“While there is no fixed timetable for a sale at this time, given the long lead times involved in such a process this appointment is a necessary next step in order to provide the option to sell some of the State’s shareholding in AIB during 2017 or indeed early 2018.”

“Such a sale is provided for in the programme for a partnership government and the ultimate decision will be subject to a range of factors including prevailing market conditions but the overriding consideration will be whether any transaction is likely to maximise the return for the State.”

Strategic investment fund

Separately, the Ireland Strategic Investment Fund (ISIF) is set to re-evaluate the State’s holding in AIB as part of its annual accounting cycle.

“As was the case in 2015, ISIF will procure its own independent valuation of the investments in AIB and Bank of Ireland and a provisional valuation will be included in their Q4 2016 performance and portfolio update early in the new year,” the department said.

AIB is 99.9 per cent owned by the State, having received a €20.8 billion bailout from taxpayers. The bank made a pretax profit of €1.9 billion last year, of which roughly half was from underlying trading and the balance from provision writebacks.