Allied Irish Banks sells Allfirst in $3 billion deal

Allied Irish Banks said today it had agreed to merge Allfirst, its US unit tarred by a trading scandal earlier this year, with M&T Bank Corp for $886 million in cash plus a 22.5 per cent stake in the enlarged group.

The $3.1 billion transaction would transform M&T into one of the largest regional banks in the US northeast with more than $49 billion in assets, the two banks said in a statement.

Allied Irish said it expected cost savings of $100 million from the merger, with $60 million to flow next year.

AIB chief executive, Mr Michael Buckley said: "AIB's partnership with M&T is the ideal opportunity for us to reposition and strengthen our involvement in US regional banking."

Mr Buckley said: "Together we create a long term, sustainable growth proposition that is mutually beneficial and which will create compelling value for AIB shareholders."

Earlier, AIB shares surged over 7 per cent on news of the imminent sale of its Allfirst Financial unit.

By mid-morning AIB shares had risen 87 cent to be trading at €12.35, a gain of just under 7.5 per cent, having declined by almost 14 per cent in the past month.

Earlier this year, Allfirst disclosed it had amassed $691 million in foreign-exchange losses because of Baltimore trader Mr John Rusnak.

Additional reporting by PA