Sharp criticism as McCreevy withdraws ICC from market

Government plans for the future State privatisations have been dealt a severe blow by the Minister for Finance's decision to withdraw from the sale of ICC Bank to Bank of Ireland.

Mr McCreevy's announcement last night that he was taking ICC off the market has drawn sharp criticism from the Opposition with claims he has created an uncertain future, not only for ICC, but also for the merger and flotation of ACC and TSB banks.

The Minister said he was withdrawing from the sale process for now and would consult the bank's board and employees about bringing forward proposals for its future. In a statement, he said his decision was based on "developments in the banking sector since the tender process was initiated". This is believed to refer to heightened overseas competition in the Irish market.

The statement added that Bank of Ireland had come to the view that acquiring ICC Bank "was not the best way for it to develop its lending activities within the small and medium-sized business sector". A Bank of Ireland spokesman declined to comment. Bank of Ireland was in the process of completing a final due diligence examination of ICC's business when the Minister decided to withdraw from the sale. The bank is understood not to have made a final bid for the bank, although, as the only bidder in the ring, the Government may have faced difficulties in justifying the eventual price secured.

Fine Gael finance spokesman, Mr Michael Noonan, said the withdrawal was the only option left to the Minister, having failed to attract sufficient interest in the State-owned bank. Labour Party finance spokesman, Mr Derek McDowell, accused the Government of leaving ICC "in limbo".

When it emerged last month that Bank of Ireland was the only bidder for ICC, Mr McCreevy said he would allow it to carry out due diligence on ICC Bank, citing it as "the preferred bidder". But he added that this did not mean that ICC would be sold to Bank of Ireland.

Mr McCreevy claimed that up to 10 banks had expressed an initial interest but only three firm indications of interest were received by the August 23rd closing date. One of the banks withdrew from the sale process before undertaking a preliminary due diligence. The second bidder, the Belgian-owned KBC Bank which owns Irish Intercontinental Bank, completed due diligence and met ICC management and union officials before withdrawing from the process, citing commercial reasons.

Industry sources suggest the lack of appetite by financial institutions for ICC was largely due to the very onerous conditions which the Government had attached to its sale. One potential bidder is understood to have dropped out because of concern that working hours and practices at ICC could cause problems within its own workforce. Others may have been uncomfortable with the deal brokered on shares for employees, estimated to be worth more than £100,000 (€127,000) to each of ICC's 358 employees.