ALLIED Irish Banks is making the biggest-ever acquisition by an Irish company, paying $1.36 billion (£840 million) for the US bank, Dauphin Deposit Corporation.
The acquisition - bigger than Smurfit's £683 million packaging acquisition in France and Bank of Ireland's £600 million acquisition of a British building society - will make AIB's First Maryland subsidiary the 45th-biggest bank in the US and one of the top three banks in its core markets in Maryland, Washington DC and southern Pennsylvania.
AIB is paying for Dauphin through a combination of cash and a share issue to Dauphin shareholders. The amount of cash that MB will pay is capped at 49 per cent of the total, although AIB's chief executive, Mr Tom Mulcahy, said that a "more desirable mix" of cash to shares would be 30-70. The Dauphin board has recommended the $43-per-share bid by AIB to its shareholders, three-quarters of whom are private investors.
"Dauphin overlaps with and extends our existing market. We know the bank, we have competed with it and we have tracked it since the late 1980s. It has a terrific earnings record and is in the top 10 in the US for earnings growth in the past 10 years," Mr Mulcahy said.
"It's a quality institution and will enhance what we already have. It's a terrific deal and will make FMB the 45th-biggest bank in the US, It's a low-risk acquisition."
He added that the acquisition fits in perfectly with AIB's strategy of being one of the top three banks in each of its markets, Baltimore, Washington DC and its suburbs, south-central Pennsylvania and northern Virginia. In south-central Pennsylvania, the combined FMB Dauphin will be the biggest banking group.
Although Mr Mulcahy said that there is little overlap between First Maryland's 195 branches and Dauphin's 98 branches, he said that AIB would aim to generate cost savings of $48 million per annum mainly through the elimination of duplicated head office and administrative functions. An unspecified number of redundancies from Dauphin's 2,700 staff and other costs will result in a $60 million (£37 million) charge for AIB.