Bank of Ireland retracts Abbey National offer

Bank of Ireland has withdrawn its takeover offer to Abbey National shareholders having failed to gain support from investors for the deal.Abbey National had rejected the bid and yesterday appointed Mr Luqman Arnold as its chief executive to implement a recovery plan for the struggling former building society.

Bank of Ireland shares rose strongly when the approach was abandoned. Yesterday its shares gained 45 cents to close at €10.55.

In a statement to the Stock Exchange, Bank of Ireland said it had noted Abbey National's recent statements in relation to its proposal and accepted that its position was unlikely to change. A spokesman added that the bank would continue to seek opportunities in the UK.

Abbey National said it would return to focusing on restructuring its business. Abbey National shares, which had rallied strongly on the back of bid speculation, lost 61.5p in London yesterday to close at £6.23.

The sharp drop in Abbey's share price indicated that investors believed that strong hands were taking the wheel and that the prospect of any further takeover attempts was slight.

Mr Arnold fills the vacancy left by Mr Ian Harley who was ousted as chief executive in July after the bank issued a profits warning. Abbey National chairman, Lord Burns, said Mr Arnold (52) had a proven track record "in managing complex businesses facing challenging times". He added: "He clearly has outstanding leadership and strategic skills, and is the ideal person to steer Abbey National back to a strong growth path."

Bank of Ireland had stressed that further progress on the proposal could be achieved only with Abbey National's co-operation and due diligence. "Such co-operation has not been forthcoming. Given this position, the bank will not proceed with its proposal," the statement said.

Bank of Ireland had offered between 90 and 95 new Bank of Ireland shares for each 100 Abbey National shares and about £1.30 in cash per share valuing the bid at more than €16 billion.

Mr Len Riddell, banking analyst at Goodbody Stockbrokers, said the announcement had not come as a surprise, given the cool reaction it had received from investors.

"Some people could say that Bank of Ireland chief executive, Mr Michael Soden, has left the bank in a vulnerable position but others might say he won the moral high ground. You could also say that Abbey National was remiss in not having at least held talks with the bank," said Mr Riddell.

The Irish Bank Officials Association (IBOA) called for an immediate meeting with the bank's senior management to discuss the future direction of the bank following its failed attempt to take over Abbey National.

"Staff and customers are extremely concerned at recent events in Bank of Ireland," according to IBOA general secretary Mr Larry Broderick. "The recent merger frenzy in the banking industry, which has been dictated by chief executives and the boards of the banks, as well as market analysts, have lent a great deal of uncertainty to those who are employed in the industry."