What’s Next for the IPO That Could Be London’s Biggest This Year

  • Ireland’s government appointed bookrunners on Thursday
  • AIB share sale could happen as soon as May if markets allow

The Irish government’s sale of part of its stake in Allied Irish Banks Plc came a step closer last week. On Thursday in Dublin, the finance ministry appointed another group of banks to help in what could be the biggest listing on the London and Irish stock exchanges this year.

How much of AIB will be sold?

The government hopes to recoup about 3 billion euros ($3.3 billion) or more from selling 25 percent of AIB, which had to be rescued by the state during the financial crisis. Including the so-called greenshoe, about 27 percent of the lender could be sold. The government owns 99.9 percent of the bank, and Finance Minister Michael Noonan has said it may take a decade to return the bank fully to private hands.

When is the IPO going to happen?

Noonan has indicated the sale could take place in May or June. If that’s delayed, the next window is probably in the fall. Noonan has consistently said the determining factor will be maximizing value from the sale, and the state of the wider market will play a key role. The Bloomberg Europe Banks and Financial Services Index has risen 28 percent over the last six months. That rally has stalled in recent weeks, and privately, government officials insist they won’t be rushed into a sale.

What is AIB worth?

The agency that manages the government’s shareholding, the Irish Strategic Investment Fund, valued AIB at 11.3 billion euros in February. That was before the bank released its 2016 results, including a pretax profit of 1.7 billion euros and a reinstated dividend, and government officials view the February valuation as low.

For more on how AIB has been preparing for an IPO, click here

How will the sale be priced?

A tiny sliver of AIB’s shares is still traded on the junior Dublin market. These are so thinly traded, they aren’t considered a particularly useful measure of the bank’s value. As ever, the price will be determined by demand, and early soundings indicate demand will be strong. AIB is viewed as a proxy for the Irish economy, which is growing at twice the pace of the euro-region. The bank is the biggest player in the Irish mortgage market, with about 35 percent of new lending. A valuation of about 12 billion euros would suggest a price of around 4.50 euros per share.

Royal Mail -- a salutary tale?

In 2013, Royal Mail Group Ltd. closed 38 percent higher on its trading debut, prompting criticism of the Conservative-led U.K. government, which was accused of failing to get full value for the taxpayer. The Irish government will likely heed that lesson. On other hand, investors will be wary of overpaying. In 2015, the government sold shares in Permanent TSB Group Holdings Plc at 4.50 euros each. They are now trading at 2.39 euros.

Who is advising on the deal?

The government hired Bank of America Corp., Deutsche Bank AG, and J&E Davy as global coordinators for the sale. Rothschild & Co is advising the government on the sale. Morgan Stanley and Goodbody Stockbrokers are working with AIB. On Thursday, the government named Investec Plc., Goldman Sachs Group Inc., Citigroup Inc., UBS Group AG, JPMorgan Chase & Co. and Goodbody as bookrunners on the deal. The fees involved for the banks are as much as 14 million euros, according to the finance ministry.

What’s left to be done before the IPO?

Nearly everything is ready at this point, with bookrunners the last investment banks to come on board. AIB executives have been meeting investors as part of a so-called “non-deal roadshow,” while the prospectus is being compiled. The next steps for the bank are its annual shareholder meeting on April 27 and its first quarter interim management statement, which is set to be published at around the same time. Assuming Noonan gives the go-ahead, the bank will then file an intention to float, publish a so-called pathfinder document and the full prospectus. Noonan probably won’t make any move until after the AGM.