AIB reach deal with Minister to acquire EBS for €1

ALLIED IRISH Banks has reached an agreement with Minister for Finance Michael Noonan to acquire the EBS building society for a nominal fee of €1, to form one of the two new “pillar” banks under the Government’s bank restructuring plan.

The bank confirmed that EBS would continue to operate as a standalone brand and licensed banking subsidiary of AIB. The transaction is expected to be completed by July 1st subject to regulatory approvals.

“The completion of the merger of AIB and EBS will be an important milestone in the creation of a reshaped and revitalised banking sector,” said Mr Noonan.

This entity would be “a stronger and more domestically focused institution which will leave it better placed to service the needs of the Irish economy”, he said.

It would also “help return the banking system as a whole to long-term viability”, he said.

EBS chief executive Fergus Murphy said it would continue to operate its own branches. EBS customers will not be affected. Their deposits will become deposits of the same amount at a new entity, EBS Limited, a subsidiary of AIB. They will be notified of the transaction in writing next week.

“Customers can continue to do business with us as they have always done and can be assured that their deposits remain fully guaranteed,” said Mr Murphy.

The acquisition means that EBS, which was taken into Government ownership last year, will cease to be a building society as it must be demutualised in advance.

The lender will convert to a private limited company and a fully licensed bank. The special investment shares held by the Minister in the building society will convert to ordinary shares of EBS Limited to be acquired by AIB, which is 93 per cent owned by the State.

A nominal price of €1 was paid as both institutions are “substantially owned by the State”, the Department of Finance said.

“It would make little sense to impose a circular flow of funds, requiring the State to put funds into AIB to enable it to purchase EBS from the State,” it said.

EBS deposits will continue to be protected on amounts of up to €100,000 under the State’s Deposit Protection Scheme and for deposits over €100,000 by the Eligible Liabilities Guarantee, the extended guarantee scheme.

The decision to merge EBS into AIB was made by the Government following the Central Bank stress tests which showed that the banks required a further €24 billion.

AIB must raise €13.3 billion by the end of July, while EBS has to raise €1.5 billion. The Government will inject any capital that cannot be raised privately by either entity.

EBS has about 440,000 customers and 95 branches.

AIB’s Government-appointed directors – Declan Collier, Dick Spring and Dr Michael Somers – absented themselves from the board’s decision to proceed with the transaction, the bank said.