TSB Bank and ACC Bank will now move to set up a non-statutory board to oversee the arrangements for the simultaneous merger and flotation of the banks following the approval of their plan by the Government.
The complex merger and flotation process is not expected to be completed until the middle of next year.
It will result in a bank with total assets of £4 billion (€5.07 billion) which on current market levels could have a market capitalisation of about £500 million.
The Minister for Finance yesterday announced that subject to the necessary regulatory approvals the Government has agreed to the proposals from the boards of ACC and TSB that the banks be allowed to merge and float on the stock market. Mr McCreevy will now advertise for advisers to the Government on the merger and flotation. Because the appointment of legal, financial and stockbroker advisers will be carried out by public tender and must be advertised in the Official Journal of the European Communities, the process is expected to take two to three months. The appointment of the board to oversee the merger and flotation is expected to start with the appointment of a chairperson independent of the two banks. The banks will want to appoint a chairperson who is respected in the market and who will be seen as credible and effective by potential institutional investors. Each bank will then appoint an equal number of directors probably four each and the two chief executives Mr Harry Lorton of TSB and Mr John McCloskey from ACC will join the board. This board will develop the strategy for the merged bank, draw up a business plan and prepare the structures for the merger and flotation. Issues that will have to be tackled include the appointment of the top executive team - it has been decided that Mr Lorton will be chief executive of the new public company - and the rationalisation of the new company.
The merger and flotation has to take place simultaneously because of the complex legal structure of TSB. Last night the board of TSB and ACC "warmly" welcomed Mr McCreevy's announcement of the Government approval of their plan. In his announcement Mr McCreevy said the Government accepted the principle of an employee share option plan (ESOP). Employees of ACC and TSB will be able to get a shareholding of up to 5 per cent in the new bank in return for change and an additional stake of up to 9.9 per cent "on the basis of the current valuation of the two banks".
The terms and conditions of the ESOP will have to be negotiated between the parties. In his statement Mr McCreevy said it was no longer necessary for the State to be directly involved in banking in an ownership capacity. "I have no doubt that, with trust and goodwill on all sides, we will bring the merger/flotation process to a successful conclusion," he said.
