Photographer: Crispin Rodwell/Bloomberg

AIB Gets Demand for All Stock on First Day in U.K.'s Biggest IPO

  • Irish government’s $4.3 billion sale has demand in price range
  • Shares to sell for between 3.90 euros and 4.90 euros each

The Irish government’s selldown in lender Allied Irish Banks Plc had enough demand for the entire 3.8 billion euros ($4.3 billion) worth of stock on offer on the first full day of the sale, an update on the deal showed.

Shares in the bank are being offered at between 3.90 euros and 4.90 euros each in the initial public offering, the country’s finance ministry said Monday. There is enough demand for all the shares within the price range, including an over-allotment option, according to a message to investors.

AIB’s sale is slated to be the largest IPO in the U.K. this year, surpassing the $762 million BioPharma Credit Plc raised when it listed in March. The sale of a quarter of the government’s holding in the firm is the latest step in the rehabilitation of AIB since its near collapse during the financial crisis.

The state spent 21 billion euros saving the company, which helped push the nation into an international rescue program. The bank, the biggest player in the Irish mortgage market, is viewed as a proxy for the economy, which is growing at about twice the pace of the euro-region.

“AIB is well positioned to sustain earnings at a 1.2 billion-euro run rate in the medium term,” Darren McKinley, an analyst with Merrion Capital in Dublin, said in a note. “We are very comfortable that AIB is well positioned to grow and of relatively low risk to investors.”

The stock may eventually price at about 4.50 euros a share, raising around 3 billion euros, according to a person familiar with the process, though the final figure will be determined by demand. That would equate to about 0.9 times book value.

The formal IPO price range would give AIB a market capitalization of 10.6 billion euros to 13.3 billion euros. The sale may raise as much as 3.8 billion euros including an over-allotment option. The price will be finalized around June 23, with shares trading unconditionally in London and Dublin June 27.

Shares Drop

A rump of AIB shares which still trade on the Irish Stock Exchange are not seen as a realistic indicator of the bank’s value because they are so thinly traded. The shares fell 14 percent to 5.60 euros at the close of trading in Dublin.

Michael Noonan

Photographer: Aidan Crawley/Bloomberg

“I am encouraged by the strong level of interest shown by investors,” outgoing Finance Minister Michael Noonan said. “A successful transaction would represent an important milestone in our journey to dispose of our banking investments and ultimately recover all the money the Irish state has invested in AIB.”

The decision to proceed comes after bankers advising on the sale assessed whether the indecisive U.K. election result would impact the price of the shares. Among the risks flagged by AIB on Monday include uncertainty stemming from the Brexit vote.

Other risks mentioned in AIB’s prospectus include further possible measures by the government to lower standard variable interest rates, while caps on executive pay may hurt the bank’s ability to retain staff. The bank also highlights its high exposure to the Irish real estate market, which helped push it to the brink of collapse during the crisis.

The government hired Bank of America Corp., Deutsche Bank AG and Dublin-based Davy as global coordinators for the sale. Morgan Stanley and Goodbody Stockbrokers are working with AIB.

Goldman Sachs Group Inc., Citigroup Inc., UBS Group AG, JPMorgan Chase & Co. and Goodbody are bookrunners on the deal, with Investec Plc as a co-lead manager. Fees for the advisers are as much as 16 million euros, according to the prospectus.

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