- The Washington Times - Friday, September 27, 2002


Allied Irish Banks PLC is selling its U.S. subsidiary, Allfirst Financial Inc., to M&T Bank Corp. for about $3.1 billion in a deal that it said was first discussed months before a currency trading scandal surfaced at the division.

The deal announced yesterday ends a seven-month effort by AIB officials to boost the reputation and market value of its Baltimore-based unit. That's after a reputed $691 million fraud by its senior foreign-exchange dealer there, John Rusnak.

AIB Chief Executive Officer Michael Buckley said the trading losses did not push the bank "farther or faster or any other particular way into this."

"I mean, we had the broad outline of what might work sketched out well before that happened," Mr. Buckley said.

AIB Chief Financial Officer Gary Kennedy said negotiations with M&T began in October 2001, well before the currency scandal surfaced in February.

Mr. Buckley said the deal was slowed down after the losses were discovered "simply because I was spending my time in dealing with those issues."

Robert Wilmers, M&T's chairman, chief executive and president, said he considered the currency-trading case "an isolated incident." He said the fact that Allfirst had a foreign exchange trading operation was "totally irrelevant to us."

"We were never interested in their foreign exchange trading business," Mr. Wilmers said.

Mr. Wilmers said his bank has an active foreign exchange desk, "but just for the benefit of our customers. We do not take positions."

Mr. Rusnak was charged in June with seven counts of fraud. A Feb. 10 trial date has been set for Mr. Rusnak. His attorney, David Irwin, has indicated the case might not reach trial. Mr. Irwin wouldn't comment yesterday on how negotiations with prosecutors have been going.

The merger of Allfirst and M&T, AIB said, would "create a strong mid-Atlantic banking franchise with over 700 branches in six states and the District of Columbia."

M&T, whose largest shareholder is billionaire Warren Buffett, has 451 branches in the Northeast. Allfirst has about 262 branches stretching from Pennsylvania to Virginia.

In a conference call with reporters, Mr. Wilmers said Mr. Buffett has been aware for some time that the deal was being negotiated and supports it.

"I've talked to him about it for the last several months and as recently as last evening and he's totally supportive," Mr. Wilmers said.

Ireland's largest bank agreed to sell Allfirst to M&T in exchange for a 22.5 percent stake in M&T Bank and $886 million in cash, and would have senior executives join the M&T board.

The deal, subject to approval by banking regulators in the United States and Ireland, was expected to be completed in early 2003.

Allied Irish estimated that the merger of Allfirst with M&T would save the combined bank $100 million by 2004.

Allfirst had about 5,800 employees as of the end of 2001, while M&T had a work force of about 9,300.

Mr. Wilmers said some support positions would likely be eliminated, but said no widespread job cuts are anticipated.

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