Carlyle Group Backing Bid for Ireland’s EBS

Dublin-based buyout shop Cardinal Asset Management, with backing from the Carlyle Group and U.S. investor Wilbur Ross, is competing with Bancassurer Irish Life & Permanent to buy Ireland’s largest building society, EBS, Reuters reported. The government recently injected 525 million euros ($704.3 million) into EBS, Reuters said. Ireland’s Minister of Finance now controls EBS, which before the financial crisis was owned by its members. Final bids for the building society are expected next week.

(Reuters) – Ireland’s government has injected an additional 525 million euros ($704.3 million) into EBS [EBSBS.UL] via special investment shares that will be translated into ordinary shares if the building society is converted into a company.

Bancassurer Irish Life & Permanent (IPM.I) and Dublin-based private equity group Cardinal Asset Management, with backing from the Carlyle Group [CYL.UL] and U.S. investor Wilbur Ross, are competing to take over Ireland’s largest building society.

The special investment shares give the Minister of Finance control of EBS, which before the financial crisis was owned by its members, including the composition of the board and the passing of members’ resolutions.

Final bids for the building society are expected to be submitted next week and Cardinal is seen as the frontrunner because Irish Life said it would need to raise 925 million euros if its bid is successful — a tough call given current market conditions.

“It feels like the private equity have a better opportunity,” said Ken Darmody, analyst with Goodbody Stockbrokers.

“You’d presume they can show the government that they have ready available funds, whereas Irish Life have to go off and raise the funds.”

Shares in Irish Life, the only major Irish lender to avoid a state bailout, were down more than 5 percent at 1.06 euros in morning trade, reflecting broader market concerns about the euro zone’s debt crisis.

The additional government capital will bring EBS’ core Tier 1 ratio, a measure of financial strength, to 8 percent by the end of the year.

Under the terms of an 85 billion euros EU/IMF bailout, Ireland has agreed to “overcapitalise” its lenders and EBS will need to raise an additional 438 million euros by the end of February to bring its Core Tier 1 ratio to 13.5 percent. [ID:nLDE6BE0G7]

The government has already poured 350 million euros — 100 million euros in special investment shares and 250 million euros in promissory notes — into EBS to cover losses on property loans and meet tougher capital requirements.

Irish Life has to raise a total of 243 million euros to bring its Core Tier 1 ratio to 12.7 percent. It has said it will generate the funds from its own resources. (Reporting by Carmel Crimmins; Editing by Sharon Lindores) ($1=.7454 Euro)