Allied Irish Banks PLC said it would divest itself of its 22% holding in M&T Bank Corp. by offering notes in the U.S. exchangeable for its M&T stock.

Allied Irish said it would hold a public offering of 26.7 million notes in the U.S. that are exchangeable for the M&T shares it already holds. Each note, which constitutes AIB debt instruments, will be issued for each underlying M&T share.

The company had been in talks with Banco Santander SA about a deal for the M&T holding, which the bank had been hoping to get rid of in order to shore up its haggard capital base. Those talks ended last month without a deal.

Last week, Ireland's government said it would inject another EUR2 billion to EUR3 billion into Allied Irish, making the state the company's majority stakeholder.

Earlier Tuesday, M&T said in a filing its chief executive said he was resigning from Allied Irish's board.

AIB American depositary shares were flat in after-hour trading--they closed Tuesday down 0.7% at $1.34 despite a broad market rally. M&T shares were down 3.2% at $80.44 after hours.

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