THIS WEEK IN THE MARKET

NO prizes for guessing the event of the week - and probably of the year - on the Irish market, AIB's £840 million acquisition of Dauphin Deposit Corporation.

To say that the reaction to the deal was enthusiastic is something of an understatement, with huge demand for AIB shares in both Dublin and London from investors who were delighted that the biggest ever acquisition by an Irish company would not involve a cash call on shareholders.

AIB might have weakened after Wall Street's by now regular slump, but the clear view in the market was that this was an excellent buy for AIB and likely to have a greater impact on AIB than the Bristol & West acquisition would have on Bank of Ireland.

For hours ahead of the formal announcement of the takeover, AIB shares were well offered, as most in the market felt that a buy of this size would have to include a cash call. The fact that at least 51 per cent of the cost - and ideally 70 per cent for AIB - would be in the form of AIB shares reassured the market, especially as capital gains considerations should mean that Dauphin shareholders taking AIB shares would not be immediate sellers.

The proposal to buy back 50 million shares in the market should, in any event, sort out any share flowback to the Irish market from Dauphin shareholders.

The differing but clearly defined strategies being adopted by AIB and Bank of Ireland also mean that investors have clear choices between the two banks. While previously both banks were viewed as virtual clones in terms of geographical distribution of their assets, now investors can choose between the Ireland mid Atlantic assets of AIB and the Irish economy UK housing assets of Bank of Ireland.

The yield gap between the two shares suggests that, with the acquisition uncertainty now eliminated, AIB should close the gap on Bank of Ireland and cement its position as Ireland's biggest public company - a position recently temporarily relinquished to Bank of Ireland.

Certainly the addition of a net £90 million - assuming AIB's gets its "desirable mix" of a 70-30 shares cash split for Dauphin, will comfortably put AIB into the number one position, with a market capitalisation of well over £3 billion.

Elsewhere, it was not a very good week for Smurfit, even though the fourth quarter results from JS Corp were no worse than expected. It was more the negative comments about current trading that depressed the market, with Smurfit shares drifting back towards 170p - the level at which former chief operating officer Mr Howard Kilroy sold 800,000 shares on Thursday.

The food sector has had a mixed time of it in recent months, with Kerry, Greencore, IAWS and Avonmore all doing rather well but Waterford and Golden Vale faring pretty poorly. For Avonmore and Waterford, there was some good news this week with the offer by Milk Marque to lower its British milk prices for the first time since the deregulation of the market in 1994.

Reports that Avonmore has withdrawn from its Hungarian liquid milk business had no impact on the shares, with most in the market taking the view that the business was so peripheral as to have little effect on Avonmore.