State to raise up to €3.8bn from AIB share sale

Advisers to received €41m in fees with as much as 25% of AIB to be sold in IPO

The AIB share sale will be Europe’s biggest IPO so far this year. Photograph: Reuters

The AIB share sale will be Europe’s biggest IPO so far this year. Photograph: Reuters

 

The State is set to raise up to €3.8 billion from selling a stake in AIB to stock market investors in the coming week. The deal will also generate €41 million in fees for investment bankers, lawyers and other parties involved.

Documents published Monday night said the Government plans to sell as much as a 25 per cent stake in AIB with shares priced at between €3.90 and €4.90 each.

Investment banks and brokers working the deal also have an option to buy the equivalent of further 3.75 per cent stake from the Government, if investor demand is strong, and sell it into the market.

With final pricing of the deal expected to be concluded on June 23rd, the current range implies AIB would have a market value of between €10.6 billion and €13.3 billion when it joins to the main stock markets in Dublin and London at the end of the month.

Market sources highlighted that most major European initial public offerings (IPOs) of shares over the past two years were priced below the middle of the initial range. The mid-point of the AIB range points to a valuation of almost €12 billion for AIB and proceeds for the Exchequer of just under €3 billion.

Delayed IPO

There had been a view last Friday that the publication of the deal prospectus and price range, originally scheduled for early this week, could be delayed by a couple of days or even fall into next week because of the unexpected outcome of the UK general election, resulting in a hung parliament.

However, advisors working on Europe’s IPO so far this year concluded that the market fallout has been muted enough to press ahead.

Taxpayers have owned 99.8 per cent of AIB since it was seized by the State just before Christmas 2010 as part of the bank’s gross €20.8 billion bailout to help deal with a surge in bad loan losses during the financial crisis. It has so far returned €6.8 billion – including the repayment of capital injected into the bank, interest and fees for Government guarantees of the banking sector during the downturn.

The Government has said it is restricted, under EU fiscal rules signed up by the Republic following a referendum in 2012, to using the one-off proceeds from the sale of the AIB stake to repaying national debt.

The €41 million fees bonanza for advisers includes €16 million of costs incurred by the State for investment banks and brokers – including Deutsche Bank, Bank of America Merrill Lynch, Goldman Sachs, and Davy – working on the transaction. AIB has a further €25 million of expenses relating to the deal, understood to include corporate advisers, lawyers and stock market fees.