DUBLIN (Reuters) - Allied Irish Banks Inc (ALBK.I) will sell a 22 percent stake, currently valued at around $2.2 billion, in New York regional lender M&T Bank Corp (MTB.N) in a public offering, the bank said in a statement on Tuesday.
The Irish government will take a majority stake in AIB next month to help it fill a capital hole of 10.4 billion euros caused by the bank’s fatal courtship of property developers during the go-go years of the “Celtic Tiger” economy.
AIB said it would make an announcement later on the price of its M&T placing, which is being underwritten by Morgan Stanley and Citigroup.
M&T shares are closed up 1.14 percent at $83.09 on the New York Stock Exchange.
Ireland’s regulator stunned investors and AIB’s own management last week when it said the bank, once Ireland’s top lender by market value, would need an additional capital infusion of 3 billion euros on top of an existing requirement of 7.4 billion euros.
The bailout for AIB is part of an overall bill of up to 50 billion euros to clean up years of reckless lending by Ireland’s banks. The cost will saddle taxpayers with years of cutbacks and tax increases.
Before the regulator’s bombshell, AIB had hoped to raise its 7.4 billion euros capital target with disposals and a rights issue.
It had already generated 2.5 billion euros from selling its Polish business to Banco Santander SA (SAN.MC), but talks about selling its M&T stake to the Spanish bank recently broke down.
The government, which currently has a 19 percent stake in AIB, will underwrite a 5.4 billion euros capital raising by the bank next month. The raising will be completed before the end of the year.
Analysts expect the government will end up owning 90 percent of AIB.
Reporting by Carmel Crimmins; editing by Andre Grenon