US private equity firm JC Flowers, which is trying to buy troubled British bank Northern Rock, and Icelandic bank Kaupthing have joined forces to assess a bid for Irish Nationwide Building Society.
JC Flowers and Kaupthing are closely aligned. The US firm became a shareholder in Kaupthing following the Icelandic bank's takeover of Dutch lender NIBC in August in a €2.985 billion cash and shares deal. JC Flowers led a consortium which bought NIBC in 2005 for €2 billion.
It is believed that Kaupthing became interested in looking at Irish Nationwide only after it had completed the purchase of NIBC. Its partnership with JC Flowers gives it additional financial muscle for further acquisitions, particularly given the current difficulties in raising finance for major transactions.
Asked about the approach, a spokesman for Irish Nationwide said it did not comment on market speculation.
JC Flowers and Kaupthing will, if they proceed with a bid, act as partners in any approach. The New York-based firm will need Kaupthing's banking licence, an essential requirement if a bid for the society is to be successful.
Irish Nationwide would sit well with Kaupthing's business - the Icelandic bank lends to British property developers, while the society, headed by Michael Fingleton, is a lender to some of Ireland's wealthiest developers, including Seán Mulryan, who is active in the London property market. The bank's British subsidiary, Kaupthing, Singer & Friedlander, also has a property finance division.
JC Flowers has a strong reputation as a dealmaker in the US and specialises in buying financial institutions in trouble. Yesterday it attempted to get back into the auction process for Northern Rock as it met the board of the embattled bank. The US company is competing against a number of rival bids, including a consortium led by Richard Branson's Virgin Group that has been named as a preferred bidder.
Goldman Sachs is running the sale process for Irish Nationwide. Several parties, including US lender GE Money and German bank Hypo Real Estate, have expressed an interest in the society, which carries a price tag of €1-1.5 billion. However, if a sale proceeds, it is expected to sell for somewhere towards the lower end of this scale given the current pressure on financial stocks. A sale is not expected to be completed before the end of the year.
Icelandic banks have been aggressively expanding outside their home market in recent years through acquisitions. Kaupthing is the second Icelandic bank to express an interest in Irish Nationwide.
Landsbanki has been carrying out due diligence on Irish Nationwide for some time and is thought to be a frontrunner to buy the business.
The recent dislocation in the financial markets has prompted it to look for more information on the society.
