CANADA LIFE, part of Great West Lifeco, the second largest insurance company in Canada, has emerged as the leading contender to take over Irish Life, which is being sold to reduce the State’s cost of bailing out the banks.
The company has bid more than €1 billion for the life business of Irish Life and Permanent, which requires €4 billion in additional capital following the bank stress tests in March 2011.
The decision to enter exclusive talks with Canada Life has yet to be taken by the Government but once ratified formal due diligence will begin on Irish Life, a source familiar with the sale process said.
Irish Life and Permanent, the largest life assurance business and mortgage lender in the country, is more than 99 per cent owned by the State following an injection of €2.7 billion in public funds in July.
A spokesman for the Department of Finance, which is managing the sale of Irish Life, declined to comment on the process, citing market sensitivity.
A spokesman for Irish Life and Permanent had no comment.
The Central Bank ordered Irish Life and Permanent to raise €4 billion by the end of the year after the stress tests but delays may push the sale of Irish Life, the proceeds of which will cover part or all of the remaining €1.3 billion required, into next year. In such a scenario, the State would inject the remaining cash pending completion of the sale and recover funds from the sale proceeds.
A Government document on budget and banking plans leaked to the German parliament this week said that the recapitalisation of the banks would be completed “subject to appropriate adjustments for asset sales of ILP”.
The Government said the State authorities would “complete the assessment of options to strengthen the restructuring plan for ILP” by the end of the year.
This would be done in consultation with the “troika” of the European Commission, ECB and IMF.
The Government has not made public its plans for Permanent TSB other than Irish Life and Permanent would be broken up and restructured. Other bidders for Irish Life were a joint offer from US buyout firm JC Flowers and Apollo Global Management, and one from CVC Capital Partners, according to Bloomberg News.
The Government has injected €62 billion into the Irish banks, nationalising Anglo Irish Bank, Irish Nationwide Building Society and building society EBS.
AIB, which has taken over EBS, and ILP have effectively been taken into public ownership. Bank of Ireland is the only bank to avoid State control as a result of the Government’s sale of a 35 per cent stake to a Canadian-led group of private investors for €1.1 billion.
This, in addition to inflicting losses on junior bondholders, has saved the Government €7 billion of the additional €24 billion capital bill set after the stress tests.
