Noonan to announce plans to go ahead with AIB flotation

The Minister for Finance, Michael Noonan, will bring a memo to Cabinet next week on the possible sale of shares in AIB. The Minister is expected to indicate that he plans to proceed with a stock market flotation of up to 25 per cent of the bank.

Mr Noonan will brief the Cabinet on Tuesday and is likely to update them on his plans to sell shares in AIB via an initial public offering (IPO), subject to favourable market conditions and the State achieving the right price for taxpayers.

This follows the decision by the Department of Finance on Friday to initiate a tender process to select bookrunners and co-lead managers to assist in a potential listing of the bank.

These investment banks will play key roles in underwriting the flotation process and represent another step on the path to an IPO for AIB.

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Tender competition

The appointments will be made following a tender competition involving the members of “lot three” of the department’s capital markets distribution panel.

This was set up in 2014 and contains 12 Irish and international groups. The department is expected to run a short process before making the appointment.

The successful companies will be appointed until July 2018, providing the State with “optionality” on the timing of a potential flotation of AIB shares through 2017 and 2018.

This announcement comes a day after AIB announced a €1.7 billion pre-tax profit and proposed the payment of a €250 million dividend, its first since the crash in late 2008.

AIB's chief executive Bernard Byrne said the bank was "ready" for a stock market listing whenever the Government decided to move.

The bank will hold a capital markets day on March 9th for analysts, after which its executives are expected to commence non-deal roadshows among potential institutional investors for the rest of March. These meetings will be used to set out the investment story behind the bank.

Main markets

The State is expected to offer 25 per cent of AIB’s shares to institutional investors in an IPO process. This is a crucial minimum threshold for the bank to achieve if its shares are to be eligible for listing on the main markets in Dublin and London.

At present, AIB shares trade on the junior ESM market in Dublin but there is little liquidity in the stock and its €14.2 billion market cap has little relevance to its real value given that the State owns 99.9 per cent of the stock. The shares closed unchanged at €5.25 yesterday.

A listing of up to 25 per cent of AIB is allowed for in the programme for Government. Earlier this year, Mr Noonan indicated that May or June would be the first window of opportunity for a flotation.

In response to an oral question on Tuesday from Anti-Austerity Alliance TD Paul Murphy, Mr Noonan said an IPO of AIB shares was the "optimal" route for the State to take to recoup its investment in the bank.

‘Preparatory work’

“Officials in my department, along with our independent financial adviser

Rothschild

, had done considerable preparatory work in this regard,” he said.

In December, the department appointed Bank of America Merrill Lynch, Davy and Deutsche Bank as "global co-ordinators" to assist in a potential IPO. Rothschild had previously been appointed as independent financial adviser to the department for the project.

In February, Gordon MRM in Dublin and London-based Citigate Dewe Rogerson were appointed jointly as PR advisers for the flotation.

In a note published yesterday, ratings agency Moody’s said it expects AIB to “continue to maintain solid capital levels through profit generation and prudent capital management” in the coming years.