US-backed Cardinal preferred as EBS bidder

A PRIVATE equity consortium led by Dublin firm Cardinal Capital Group has been chosen as the preferred bidder for the State-owned building society, EBS.

The consortium, backed by US private equity group Carlyle and New York-based billionaire Wilbur Ross, will enter exclusive negotiations with the National Treasury Management Agency, which is managing the sale.

The Cardinal group was told on Thursday that it had had been chosen as preferred bidder, ahead of Irish Life and Permanent, the other final bidder in the race, according to well-placed sources.

Spokesmen for Cardinal, Irish Life and Permanent and the NTMA had no comment to make.

Cardinal, which is led by Dublin businessmen Nigel McDermott and Nick Corcoran, will inject just over €600 million into the lender, up from a bid of €525 million.

The final decision on the sale of the building society will be taken by the next government following yesterday’s election, though the sale process is expected to proceed more quickly from this stage.

Michael Noonan, Fine Gael’s finance spokesman, said last week that the Cardinal group seemed to be the preferred bidder for EBS.

The Government has injected €875 million in EBS, taking control of the building society through special investment shares.

The lender requires a further €438 million to meet the higher capital ratios set under the bailout agreed by the Government with the EU Commission and the International Monetary Fund.

This was to have been injected by a deadline of next Monday but was put back by Minister for Finance Brian Lenihan to allow the new government approve the recapitalisation.

Mr Noonan has said that the new government should postpone any further bank bailouts until April when the Central Bank’s stress testing of AIB, Bank of Ireland and EBS has been completed.

A successful takeover by Cardinal means that the Government would not have to inject cash in the next recapitalisation of EBS.

Under Irish Life and Permanent’s proposal, the Government would have to inject this capital.

Cardinal has offered to cover up to about €450 million of further possible losses at EBS and to share any additional losses beyond that, with the State taking 70 per cent.

The Government has also been offered 10 per cent warrants in EBS if the building society reaches certain targets should Cardinal make any gains from the lender.

If successful, the Cardinal-led group is planning to use EBS for further acquisitions in the consolidation of the banking system as other lenders sell assets to shrink the sector under the EU-IMF deal.

It may next consider a bid for Permanent TSB, the banking division of Irish Life and Permanent.

This could create a “third force” in Irish banking to rival Bank of Ireland and Allied Irish Banks.