A formal proposal for the merger of TSB Bank and the state-owned ACCBank is expected to be put to the Minister for Finance within days. Negotiations between management at the two banks have resulted in a plan for the merger of the banks and the simultaneous flotation of the merged operation on the stock market.
If the Minister approves the plan, the process is expected to take a year to 18 months to complete. At current market levels with the buoyancy of banking shares, a merged and floated TSB/ACC could generate over £500 million for the Government. A merger would result in a bank with 130 branches and 1,650 employees before any rationalisation or restructuring.
Following intensive negotiations between the parties in recent weeks, contentious issues, including those of staff rationalisation and overlapping branches, are understood to have been resolved. Sources said that natural wastage and the additional staffing required to prepare for the merger and flotation and to operate as a publicly quoted company would ensure that there would be employment opportunities at the merged bank.
If the Minister approves the merger, new job opportunities will include the areas of product rationalisation, share registration and shareholder relations. The headquarters of the merged operation is expected to be the new ACC head office at Charlemont Place in Dublin. Staff at TSB have now appointed a consultant to advise them on the proposals for the merger. Mr Greg Sparks will carry out an examination of the proposals on behalf of TSB's 1,100 employees. He was appointed following interviews by a panel representing the staff. It is understood that TSB Bank has agreed to fund the examination which is expected to start within a week. No details were available yesterday on the cost of the exercise. Mr Sparks is expected to formally ask TSB management for its proposals within days. Preliminary discussions between TSB and ACC started in August 1998 after TSB expressed interest in a merger. Initial meetings involved a preliminary examination of the feasibility of a merger.
Preliminary discussions between TSB and ACC started in August 1998 after TSB expressed interest in a merger. Initial meetings involved a preliminary examination of the feasibility of a merger. However, at that time ACC management were more interested in the sale of a stake in the bank to strong EU-based financial institutions with French bank Credit Agricole favoured.
However, at that time ACC management were more interested in the sale of a stake in the bank to strong EU-based financial institutions with French bank Credit Agricole favoured. However, following internal discussion at ACC and meetings between the two banks, the board of ACC came out in favour of merger talks with TSB at the end of September. That decision was welcomed by the TSB trustees and intensive discussions got underway in October.
Valuing a merged bank ahead of its flotation is difficult and much will depend on how successfully the operation can reduce its cost base and re-brand itself as a bank focused on the personal and smaller corporate sectors. Both are relatively high cost operations with cost/income ratios in excess of 60 per cent in a market where target ratios are closer to 45 to 50 per cent.
Significant cost reduction is seen as an essential prerequisite to attracting institutions investors in any share offering. A good response from institutional investors would be essential to a successful flotation.
