AIB has said it expects the sale of its stake in M&T to raise approximately $2.0 billion (€1.5 billion) as the bank announced the pricing of its shares in the American bank.
Some 26.7 million notes will be offered at a price of US$77.50 per note in a public offering.
These contingent mandatory exchangeable notes can then be converted into M&T shares.
M&T's share price closed at $83 on Tuesday night, just ahead of the announcement of the disposal.
The transaction is being underwriten by US banks Morgan Stanley and Citigroup, which means they will take up the shares if investors do not take up the stock in the public offering.
AIB holds a 22.4 per cent stake in the bank. An EGM will be held on November 1st to seek shareholder approval.
The disposal of M&T is also expected to generate approximately €0.9 billion of equivalent equity capital, the bank said this morning. This will be used to meet part of AIB's revised Prudential Capital Assessment Review (PCAR) requirement of €10.4 billion.
The net cash proceeds will be used as an additional source of liquidity to support AIB's business activities the bank said.
AIB’s decision to place the stake follows the breakdown of talks between Spanish bank Santander and M&T over the possible merger of Santander’s US bank Sovereign with M&T.
It is a week since it emerged that AIB will require an additional €3 billion to meet a revised capital adequacy target set down by the Financial Regulator. The Central Bank said the amount of equity capital the bank needed had risen from €7.4 billion to €10.4 billion as a result of hefty discounts being applied to AIB loans transferring to the National Asset Management Agency (Nama).
The bank will commence a €5.4 billion capital raising project next month.
AIB's shares were trading down almost 7 per cent at 3.30 pm, at €0.414.
