A flurry of bids is expected on Monday for New Ireland Assurance ahead of the Tuesday deadline for receipt of offers for the life assurance company. The future ownership of the company with a market value of £210 million is expected to be decided quickly.
New Ireland's parent company, British-based SunLife & Provincial, is expected to make a decision within two weeks of the closing date for bids. While the British company, which owns 83 per cent of New Ireland, has cautioned that it has not taken a strategic decision to sell, most industry sources believe a sale is imminent.
In a consolidating sector, there is considerable bid interest in the life assurance operation. Irish Life, Irish Permanent, Bank of Ireland, Eagle Star, Hibernian and Guardian are expected to be among the institutions which will make strong bids for New Ireland.
The expected sale should accelerate the consolidation of the market, where 21 companies operate.
New Ireland has significant scale in a sector where there are a number of small players. Industry figures for 1996 show it took in 7.48 per cent of total annual premium income - the third-highest share after Irish Life and Norwich Union. It had the second-highest single premium income share (lump sum payments for life and pension policies) at 14 per cent, behind Irish Life (23.4 per cent) and ahead of Ark Life (11.8 per cent). Because of its size in the market, New Ireland is an attractive acquisition opportunity for a number of existing market players.
Irish Life, the largest company in the life market, is understood to have a strong interest in the business. Its interest is probably based on strategic and defensive considerations. Strategically, Irish Life will want to ensure a strong position for the future in a consolidating market where traditional lines between financial services operations are blurring. Defensively, it will want to reduce the threat of a competitor expanding aggressively through acquisition.
But Irish Life will have to evaluate how a deal, which would result in a significant increase in sales staff numbers, would add to shareholder value.
Irish Permanent is considered a serious bidder for New Ireland. Since it acquired Prudential Life Ireland, now renamed Irish Progressive, the operation has expanded aggressively. In 1996, it had 4.3 per cent of the annual premium market and 2.4 per cent of the single premium market.
With a current market capitalisation of £656 million Irish Permanent will be sensitive to the price at which New Ireland could change hands.
New Ireland's current market value - its shares last traded at £19.50 - is £210 million. But, in a competitive bidding situation, the company is expected to generate a significant premium over its market value. Some of the interested Irish bidders may come to the market with rights issues to raise funds for a deal.
New Ireland managing director Mr Jack Casey has insisted that SunLife & Provincial, itself a subsidiary of French-based AXA/ UAP, has a number of options other than selling the operation. These include buying out the minority shareholders and making New Ireland a wholly-owned subsidiary or setting up a joint venture with another institution in which SunLife & Provincial would have a 50 per cent stake.
