Allied Irish Banks PLC's pending sale to investors of its 22.4% stake in M&T Bank Corp. could make it easier for M&T to repay its federal aid and pursue more acquisitions, analysts said.
The announcement of a public offering Tuesday of the $2.2 billion stake may also put to rest speculation over whether M&T will enter into a merger with Spain's Banco Santander SA, the parent of Sovereign Bank.
"[The] divestiture should end speculation," Rick Weiss, an analyst with Janney Montgomery Scott LLC, said in a research note Wednesday. "Santander would have acquired the shares" if a deal were to occur.
Now he said, "M&T is relieved to be free" of the distraction and "well positioned" to make acquisitions in the Northeast.
Keith Horwitz, an analyst with Citigroup Inc., said it is unclear how the sale will affect M&T's repayment of its $600 million of aid from the Troubled Asset Relief Program. It could move along the repayment, he said.
"An argument can be made this demonstrates access to the capital markets regulators typically look for in order to approve … repayment," he said.
The fate of AIB's 26.7 million shares of M&T has been up in the air since May, when the Dublin company said it would unload the stake under its partial nationalization.
Analysts speculated that it could serve as the impetus for a merger or financial partnership between M&T and a foreign or U.S. bank.
A public offering is favorable for M&T because it does not dilute M&T's shareholders, analysts said. It also could improve the liquidity of its stock. Weiss said the stake is "expected to be widely distributed."
Michael Zabel, M&T's spokesman, declined to discuss its impact on paying back the government or doing deals. He said this was "anticipated" as one of AIB's "options."
"We think it's a nondisruptive way to disperse the shares into the open market," he said.
M&T executives have said in the past that the company was waiting for more certainty in the direction of the economy before repaying the government.
They have said the firm would consider potential acquisitions that make strategic and financial sense, but is not aggressively seeking acquisitions.
AIB acquired the stake when it sold a U.S. subsidiary to M&T in 2003. It holds 26.7 million of AIB notes that are exchangeable for common shares in M&T. AIB is expected to list the shares Wednesday on the New York Stock Exchange.