Liams Last Post: Tullow causes worries , but ok news from AIB and I.Life to end the week.

Good Afternon ,

 

A wearisome day with lots of attention and speculation again on Tullow with the media reports that Uganda have withdrawn the Block 3A exploration licence in Uganda from Tullow. Lots of different views , the stock price is holding relatively firm but it is worrying and what I do know is that markets hate uncertainty and in uncertain markets stocks tend to drift. We continue to await some High impact drilling results imminently and this continues to keep people in the stock.

 

 Irish Life just announced its PCAR which looks positive, not requiring external capital in its current form. A stress test scenario will require €145m which

can be met from internal sources. A separation of the Life and the Banking businesses would require €925m of capital to be injected into the Bank which is

in line with our estimates. I.Life continue to have a predominantly funding rather than a capital problem...so nothing major new here except that there is no prwessure for them to do a rights issue unless they are doing a transactionand that of itself would be positive news.

 

In the later afternoon AIB announced that Santander had agreed to pay eur2.9bn for the 70% stake in Bank Zachodni.. Now the speculation is whether this is good news as it was rumoured that Santander might have been intersted in M&T also. The AIB ADR has risen +1% after the Dublin market closed. I think that there is nothing to be read into an announcement re Poland first. No indication that Santander are not interested in M&T.

 

Ither news today was the sensible move by Origin to put its food business with Batchelors the Origin food business was not exactly big scale so this works out for both . Origin say it will be marginally dilutive. The slight worry we have to clear up here is that the proforma sales figure for Valeo which is said to be eur 200m whereas Origin said that for the year to 31 July 2009 the Food division generated revenues of €295.3m and operating profit of €14.6m.  We had a decline in revenues in our model but this looks a tad extreme.

 

Under the terms of the transaction Origin will dispose of Origin Foods to Valeo based on an enterprise value of €78m. Origin will hold a 45 per cent equity interest in Valeo, receive cash consideration of €26m on completion and deferred consideration of €35m as a vendor loan note. The cash proceeds will initially be used to repay debt and ultimately to fund development of the Group's agri-services business. Valeo is being financed through a combination of ringfenced banking facilities, equity funding to be provided by CapVest, rolled equity and the vendor loan note from Origin.

 

The market liked the deal and Origin jumped +7.6% to eur2.70

 

And so ends a trying week for Ireland inc with irish spreads over bunds now back to a mere 5.48%  having touched 6.20% on Wednesday , this reflects that the Anglo announcement , the I.Life news and the AIB news are helping to allay the worst fears that had rolled over ireland this week.

 

First Leinster Match Tomorrow , and the first match of the newly expanded Belmont Under 9 soccer team tomorrow morning….the Autumn is truly here

 

Have a good weekend

 

Liam

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Liam Boggan

　

Merrion Stockbrokers

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