Private equity rivals exploring joint approach

MEMBERS OF the Mallabraca private equity consortium, which is mulling a recapitalisation deal with Bank of Ireland, have explored a joint approach with rival private equity players in which they would participate with the Government in a recapitalisation of the banking system at large.

Mallabraca is backed by JC Flowers, the Carlyle Group and two Middle Eastern sovereign wealth funds. Some members of the consortium are understood to have discussed a possible joint approach in recent days with private equity firms Texas Pacific Group and Kohlberg Kravis Roberts, each of which held separate talks last week about a possible transaction with Bank of Ireland.

The exploratory contacts between some of Mallabraca's backers and Texas Pacific and Kohlberg are said to be very tentative. As such, it remains far from certain that they would proceed together to make a joint approach to the Government.

However, their engagement opens up the possibility of a wider recapitalisation proposal from the private equity sector.

This follows an intervention by Irish and international fund managers who have signalled their interest in pursuing an industry-wide recapitalisation of the Irish banks in concert with the Government.

Minister for Finance Brian Lenihan said last week that he would examine proposals for a public recapitalisation in co-investment with private participants on a case-by-case basis. He suggested that the State investment would be made by the National Pensions Reserve Fund or another public body.

The fund managers' group - led by AIB Investment Managers, Irish Life Investment Managers and Bank of Ireland Asset Management - came together last week under the co-ordination of the Irish Association of Investment Managers.

Following the appointment of corporate financiers from Deutsche Bank's London office as advisers to the group, the association is no longer involved in the process. The group is also backed by Aviva Investors, FC Ireland and Setanta Asset Management.