AIB may sell stake in MT after merger talks fail again

SHARES IN North American bank MT fell by as much as 7 per cent as merger discussions between the US lender and Spanish bank Santander broke down again.

MT and Santander had reignited talks about a possible merger of the Spanish lender’s US bank Sovereign with the New York State-based bank, in which AIB owns a 22.4 per cent stake.

Santander, which bought AIB’s Polish lender WBK Bank Zachodni last month, has been in discussions with the Irish bank about purchasing its stake in MT.

An AIB spokesman had no comment. Discussions between MT and Santander stalled over a disagreement about who would control the combined bank, which would be the ninth-largest US savings bank based on deposits.

Under a proposal put to the US Federal Reserve, Santander would have eventually acquired a majority stake in MT, leaving the bank’s 76-year-old chief executive Robert Wilmers and his management team in charge.

Should AIB be unable to offload its share in MT in a merger with Sovereign, the Irish bank plans to sell the stake to institutional investors in a placement at a discount to the stake’s market value.

Sources indicated that the breaking down of the merger talks would not delay AIB’s alternative placement plans for the stake.

AIB is in a race to raise €7.4 billion in additional capital before the end of the year to cover losses on property loans moving to the National Asset Management Agency and expected losses on other loans remaining at the bank.

The bank’s stake in MT was valued at $2.2 billion in late trading yesterday.

Shares in AIB fell 1.1 per cent to 53 cents, valuing the bank at €573 million. Analysts say that AIB could generate a capital gain of €1.2 billion from the sale of the MT stake.

This would be added to the €2.5 billion capital raised from AIB’s sale of BZ WBK in Poland.

The bank has also indicated that it could generate €400 million from the sale of other assets.

These disposals would still leave the bank €3.3 billion short of the Financial Regulator’s €7.4 billion capital target, a deficit the bank intends to meet with a rights issue of new shares to investors.

The Government, which has a stake of almost 19 per cent in the bank, has said that it will inject capital into AIB by converting more of its €3.5 billion investment last year into ordinary shares.

The level of take-up among private investors will determine whether the bank can keep the Government’s shareholding below a 51 per cent controlling stake.