Ireland’s largest bank to sell U.S. unit Allfirst
DUBLIN, Ireland (AP) – Allied Irish Banks PLC has agreed to sell its fraud-struck U.S. subsidiary, Allfirst, to M&T Bank Corp. of New York in a deal valued at about $3.1 billion – but denied that scandal had anything to do with it. The deal announced Thursday came seven months after AIB chiefs discovered an alleged $691 million fraud at Allfirst by its senior foreign-exchange dealer there, John Rusnak. Rusnak was charged in June with seven counts of fraud.
AIB chief financial officer Gary Kennedy said negotiations with M&T began in October 2001, well before the currency scandal surfaced in February. “The only impact from the Rusnak affair was a time delay. We had to put it on the back burner because of Rusnak,” he said. “I wouldn’t agree that we’re getting a monkey off our back. It’s a great deal,” Kennedy said. Allied Irish, Ireland’s largest business, said it had agreed to merge Allfirst with M&T Bank of Buffalo, N.Y., in exchange for a 22.5 percent stake in M&T, amounting to 26.7 million shares, as well as $886 million in cash.
Four AIB figures were set to join the enlarged M&T board, among them AIB chief executive Michael Buckley and Eugene Sheehy, who in August was installed as the first Irish chairman and chief executive of Allfirst. In his new role, Sheehy would oversee M&T’s combined Pennsylvania and Maryland branches. Robert Wilmers, M&T’s chairman, chief executive and president, would join the AIB board. M&T, whose largest shareholder is billionaire Warren Buffett, has 451 branches in the Northeast. Allfirst has about 262 branches stretching from Pennsylvania to Virginia.
The merger of Allfirst and M&T, AIB said, would “create a strong mid-Atlantic banking franchise with over 700 branches in six states and the District of Columbia.”
The deal, subject to approval by banking regulators in the United States and Ireland, was expected to be completed in early 2003.
Allied Irish estimated that the merger of Allfirst with M&T would save the combined bank $100 million this year and $60 million in 2003. “AIB’s partnership with M&T is the ideal opportunity for us to reposition and strengthen our involvement in U.S. regional banking,” Buckley said in a statement. “Together we create a long-term, sustainable-growth proposition that is mutually beneficial and which will create compelling value for AIB shareholders.”
In Dublin, AIB shares surged 13 percent on the news to 12.95 euros ($12.80). In early trading on the New York Stock Exchange, M&T shares were up 5.4 percent, or $4.01 a share, at $78.69.
Wilmers predicted “a smooth integration of our businesses (and) great service for our new and old customers.”
“Allfirst is the perfect partner for our growing mid-Atlantic presence. Allfirst is in growing markets, they have strong market share, and business strengths that will enhance our own operating mix,” Wilmers said in a statement.