Abbey National has rejected a takeover approach from the Bank of Ireland, and has said it would prefer to push ahead with its existing restructuring plans.

A combination of Bank of Ireland Group and Abbey National plc would deliver significant value for both sets of shareholders

Bank of Ireland

A merger between the two companies would have created Europe's 11th biggest bank, with a market value of about �15bn ($21bn).

The rejection came a day after Bank of Ireland confirmed press reports that it had made an approach about a possible tie-up.

In a statement to the London Stock Exchange, Abbey National said its board had unanimously concluded that the proposal was not in the best interests of its shareholders.

Shareholder value

Bank of Ireland said it was surprised Abbey National had "adopted such a position without any engagement or discussion between the two companies".

In a statement the bank said it had given Abbey sufficient detail of its intent, of the financial benefits for shareholders and of the structure of a combined group to merit discussions.

It said: "Bank of Ireland reiterates its view that, subject to agreement on appropriate terms and satisfactory due diligence, a combination of Bank of Ireland Group and Abbey National plc would deliver significant value for both sets of shareholders."

Takeover target

Abbey National shares had fallen from �11 at the beginning of the year to their lowest level for seven years.

But news of the Bank of Ireland's approach sent the shares 6% higher on Monday. They rose another 4% on Tuesday to close at 554p.

Even if Abbey National fends off Bank of Ireland, it is considered to be a takeover target.

It has issued several warnings about profits and currently has no chief executive.