State tightens price range for AIB IPO as deal nears

The Government has narrowed the price range at which it expects to float AIB on the stock market this week, reducing the maximum it could achieve for an initial stake sale to almost €3.6 billion.

Investment banks working on the transaction revealed on Tuesday evening that the State’s disposal of up to a 28.8 per cent interest in AIB to new investors is now set to be priced at between €4.20 and €4.60 per share. An initial range of between €3.90 and €4.90 had been targeted early last week.

The original range had pointed to a valuation of up to €13.3 billion for the bank and a price of as much as €3.8 billion for the Government stake currently being marketed to major international investors and small clients of Irish stockbroking firms.

The new price range values AIB at between €11.4 billion and €12.5 billion. Investment bankers involved in Europe’s largest IPO so far this year said on Tuesday evening that they have secured enough orders - two days before the deal is expected to be finalised - to buy all the shares at the “upper half” of the new guidance.

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The earlier, wider price range had drawn demand for a "multiple" of the amount of shares on offer, according to the syndicate of banks. Firms including Bank of America Merrill Lynch, Davy, Deutsche Bank, Citigroup, Goldman Sachs, JP Morgan, UBS, Investec, Morgan Stanley and Goodbody Stockbrokers are set to share in about €41 million of fees related to the deal.

Markets sources have said that the Government may be reluctant to price the stock aggressively, as this may reduce the market appetite for any further share placements as it seeks to extricate itself from the bank in the coming years. Former Minister for Finance Michael Noonan has previously said that it may take up to a decade to fully privatise the bank.

It is expected that between 10 per cent and 15 per cent of the shares being sold will be allocated to small shareholders who were committed to buying at least €10,000 of stock and who were signed-up clients of eight participating stockbroking firms in Ireland as of the close of business on Friday.

Most of the brokerages had set a cut-off point of close of business on Tuesday to receive orders from their retail clients.

The cut-off point for would-be institutional investors to submit orders has been set for 5pm on Thursday, with the new share set to start conditional trading on Friday morning in the Dublin and London stock exchanges.

AIB was seized by the State just before Christmas in 2010 as part of the bank’s €20.8 billion bailout during the financial crisis as banks grappled with soaring bad loans. The bank has so far returned €6.8 billion to the Government, including principal payments, interest and guarantee fees.