The curtain has finally been drawn on the State's involvement in banking with the sale of ACCBank to the Dutch Rabobank group for €165 million (£130 million).
The deal will see the ACC Employee Share Ownership Trust (ESOT) receive €24.6 million in loan notes for its 14.9 per cent stake. Under the current voluntary redundancy scheme, staff numbers are set to fall from 590 to less than 450 - which means each member of the ESOT will receive almost €55,000 as a result of the change of ownership. As Rabobank is a co-operative and not a plc, the ESOT could not receive shares in Rabobank, and instead a loan note was offered to the trust.
Rabobank has agreed to no compulsory job losses, but Rabobank Ireland managing director Mr Fergus Murphy said it was likely that voluntary severance would see job numbers fall from the current 590 towards the 450 figure.
The ESOT is effectively getting for free a 5 per cent stake for agreeing to the change in ownership, while the remaining 9.9 per cent is in respect of changes in working practices that have a direct benefit for ACC. It is understood that a small proportion of the 9.9 per cent will be acquired by the ESOT for cash before the entire 14.9 per cent stake is sold to Rabobank for €24.6 million in interest-bearing loan notes.
Rabobank has been carrying out diligence on ACCBank for the past five months after all potential Irish bidders either withdrew from the bidding or failed to lodge a bid for the bank.
The fact that Rabobank was the only serious bidder is reflected in the price of €165 million - equivalent to ACC's book value at the end of 2000 and a 10 per cent discount to the expected end-2001 book value of €185 million.
That multiple of 0.9 times the 2001 book value is half the 1.8 times book value at which the TSB was sold to Irish Life & Permanent, and also reflects ACC's recent difficulties.
These saw ACC make a €21 million payment to the Revenue Commissioners for DIRT arrears and penalties, and also a bad debt provision last year of €14.4 million - largely due to the bank's ill-fated involvement with the development of the Four Seasons Hotel in Dublin. ACC has now exited corporate banking and is concentrating on retail and SME banking.
Mr Murphy said: "Rabobank sees Ireland as a good geographical location to develop a retail presence and ACCBank represents a good strategic fit to expand our country banking strategy."
He added that Rabobank was committed to developing ACC's presence in the Irish market, and this was likely to see new investment products developed by Rabobank and its Robeco investment subsidiary in Holland introduced to the Irish market.
Rabobank already has a presence in Ireland through its IFSC subsidiary, but its acquisition of ACC means it is the first continental bank to develop a retail presence in Ireland. With 40 branches, ACC is a small player in the Irish market, but analysts believe that the financial and product strength of Rabobank could make ACC a serious niche player, even though none of the domestic banking groups felt it worthwhile to even make a bid.
Analysts believe, however, that at 0.9 times book value, Rabobank is buying ACC cheaply - especially given the multiples of book values involved in the other bank disposals by the State. ACC has been turned around by its new management over the past two years, but its change of focus towards the retail and SME sector is still at an early stage.
The new strategy has seen ACC exit the residential mortgage business and close its Dublin branches and increase the focus on business banking. "The strategy is still unproven and that is reflected in the price," said one informed source.
The disposal brings to an end a long chapter of State involvement in the banking sector. Originally, it was proposed that ACC would merge with TSB and then float on the stock market, but that proposal collapsed last year.
After the failure of the merger, both banks were told by the Minister for Finance, Mr McCreevy, to prepare themselves for sale. TSB was subsequently sold to Irish Life & Permanent for €430 million. In a separate deal, ICC was sold to Bank of Scotland for €350 million.
