Anglo Irish Bank has bought Smurfit Paribas Bank for £30 million cash (€38.9 million). The deal represents a £1 million premium on the bank's net asset value.

Anglo has placed 13.2 million shares in the market, to raise about £25 million (€31.74 million) to help fund the deal. The company said yesterday that the acquisition would be earnings enhancing immediately.

Confirmation of the deal ends several months of speculation about possible suitors for Smurfit Paribas. At one stage Irish Intercontinental Bank was mentioned as a possible buyer.

The sale follows a decision by Paribas, based in France, to sell its retail banking facilities - it owned 50 per cent of the Irish operation. Smurfit Paribas was established in 1983 as a joint venture between the Jefferson Smurfit Group and Paribas. At the end of December 1998, it has net assets of £29 million and reported a pre-tax profit of £3 million.

The bank operates in four main business areas - corporate banking, investment management, treasury and structured finance.

Anglo Irish's finance director Mr William McAteer said the purchase fitted very neatly into Anglo's operations. He said the operations of the two groups would be merged and staff would transfer from Smurfit's Dublin headquarters, where it employs about 20 people, to Anglo's operations.

Mr McAteer said it would strengthen Anglo's position in its target market - it has about 10 per cent share of lending to the middle corporate market and the acquisition would increase its share in this sector by around 1 per cent. It will also help it to build its lending portfolio in Britain.

The company said it was also keen to develop its treasury business, especially private banking, fund management and trust business throughout Europe, "both organically and through suitable acquisitions".

Mr McAteer said it was a good time to raise funds. "Strategically, we will remain very strong regarding our capital adequacy ratios," he said. "It is a safe deal," he added.

The shares were placed at £1.90 (€2.41), a slight discount to the £2.00 (€2.54) price in the market.

Mr Oliver O'Shea, an analyst at Goodbody Stockbrokers, said he understood that Anglo Irish had around £15 million in surplus capital last September, but it was not surprising it raised money because it would need to do so to fund its organic growth programme. Analysts said that to an extent Smurfit Paribas was overcapitalised - a lot of the net assets were government bonds etc. "To that extent you wouldn't expect a company to be paying a multiple for it," one said.

In the year to September last Anglo reported a 49 per cent increase in pre-tax profits, from £30.3 million to £45.1 million. The increase in profits was mainly achieved because of strong growth in its lending and treasury activities in Ireland and a good contribution from its British and Austrian operations. Mr Gary McGann, chief financial officer at Jefferson Smurfit Group said that with the withdrawal of Paribas the logical course of action was to sell the bank as a unit to a suitable purchaser.

He said the bank had established an excellent reputation as a niche player in the financial services market.