In Its Richest Acquisition To Date, Allied Irish to Pay $1.36B for Dauphin

Allied Irish Banks PLC re-entered the merger sweepstakes on Tuesday with its biggest acquisition ever - a $1.36 billion cash-and-stock deal for Dauphin Deposit Corp.

The acquisition of the $6 billion-asset company, based in Harrisburg, Pa., would boost Allied Irish's U.S. assets to $17 billion and expand its presence in fast-growing markets of south-central Pennsylvania. The Dublin bank, which has $41 billion of assets worldwide, said it expects to complete the acquisition by Sept. 30.

While analysts called the deal expensive - at $43 per share, it equals 2.36 times Dauphin's book value and 19.1 times its 1996 earnings - they said it would be a good strategic fit. Dauphin's shares rose $5.625 to $41.125 on Tuesday, while Allied Irish's American depositary receipts fell 37.5 cents to $40.625.

Allied Irish's flagship U.S. unit, First Maryland Bancorp. - acquired in 1989 - is nominally the buyer, and would jump into the ranks of the top 50 U.S. banks.

First Maryland also houses York Bank and Trust, which has 34 branches in York County, Pa. Dauphin, which has 98 branches in 12 Pennsylvania counties, would operate side by side with York for as long as two years, said Frank P. Bramble, president and chief executive of First Maryland, Baltimore.

James Schutz, an analyst with ABN Amro Chicago Corp., called the acquisition "an extension of the market opportunities Allied has with York Bank." The company should be able to save on branches while entering "attractive markets like Cumberland, Dauphin, Lancaster, and York - the 'sunbelt' of Pennsylvania," he added.

Thomas P. Mulcahy, chief executive officer of Allied Irish, said the acquisition "represents a major strategic move by AIB Group which will enhance and enlarge our successful U.S. franchise."

He noted that the acquisition would be the largest to date by an Irish company in the United States.

Allied Irish expects to cut $48 million per year in expenses as a result of the transaction. The bank said it would take a $60 million pretax charge this year to cover restructuring costs associated with the deal.

Dauphin is a highly profitable bank with its own brokerage unit. It earned $71 million for the full year 1996, an 8% gain.

No layoffs are expected to result from the transactions, the banks said. Dauphin has 2,700 employees.

Assuming the deal wins approval from shareholders of both banks and from regulators in the United States and Ireland, Christopher R. Jennings, Dauphin's chairman and chief executive officer, would become a vice chairman of First Maryland. He will also join its board of directors and head the retail and commercial operations of the Pennsylvania franchise.

Mr. Jennings will also be vice chairman of a committee in charge of the merger integration. He will report to Mr. Bramble.

Merrill Lynch and AIB Capital Markets advised Allied Irish in the deal, while Dauphin used Morgan Stanley.

Under the deal, each share of Dauphin Deposit may be exchanged for either $43 in cash or an equivalent value of Allied Irish Bank American depositary receipts. An Allied Irish depositary receipt, traded on the New York Stock Exchange, represents six ordinary shares traded on the Dublin or London exchange. To preserve the tax-free nature of the trade, Allied Irish said no more than 49% of Dauphin's shares will be converted to cash. The price range of the depositary receipts is fixed between $37 and $43.

Separately, First Maryland reported earnings Tuesday of $36 million for the fourth quarter, up 14% from the same quarter of 1995. The bank earned $132.3 million for the full year.

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