St. George Bank agrees to Westpac bid; one of Australia's biggest corporate deals

Enlarge Photo St. George Bank agrees to Westpac bid; one of Australia's biggest corporate deals

Tue, May 13 10:41 AM

SYDNEY, Australia (AP) _ St. George Bank agreed Tuesday to a nearly 19 billion Australian dollar (US$18 billion; 12 billion) takeover offer from Westpac Banking Corp.

that would create Australia's biggest bank and be one of the country's largest corporate deals. Senior Westpac executives said they were confident antitrust regulators and the federal government would not block the deal, which analysts said could provoke a wider shake-up of the banking sector.

Westpac, Australia's third biggest bank, is offering 1.31 of its own shares for each in St. George Bank share, valuing the smaller lender at 18.6 billion Australian dollars (US$17.5 billion; 11.3 billion).

St. George is currently Australia's fifth biggest bank.

The deal, announced in a joint statement, would create Australia's largest financial services company worth more than A$66 billion (US$62 billion; 40 billion) based on share prices before the offer was announced. It would also be the biggest takeover in Australian banking history.

St. George's share price surged almost 26 percent to A$33.48 on Tuesday when a trading halt was lifted.

Westpac shares sank about 2.5 percent to A$25.33. Trading in the banks was suspended Monday pending the announcement.

Antitrust regulator the Australian Competition and Consumer Commission said it had begun a review of the takeover bid but gave no timeline for its decision. Treasurer Wayne Swan said Monday all regulatory requirements would need to be met, and declined to comment further.

The labor union representing banking workers said it would fight to scuttle the deal because it could lead to job losses. "We will take the campaign directly to the banks, we will take it to their shareholders, we will take it to every level of government until it is heard that this takeover is bad for consumers, it is bad for competition and it is disastrous for the people that work for Westpac and St.

George," Finance Sector Union secretary Leon Carter told reporters. The combined group would have some 10 million customers, a 25 percent share of Australia's home loan market and A$108 billion (US$102 billion; 66 billion) in funds under its administration.

The banks would retain their own brands, and the intention was that no branches would be closed, the statement said. Westpac chief financial officer Phil Coffey said during a briefing that the deal would provide significant cost savings, but declined to put a figure on it.

The deal "would create Australia's leading financial institution with regard to meeting customer needs, distribution, strong brands, scale, financial strength and the best products," Westpac chief executive Gail Kelly said in the joint statement. Kelly was St.

George's chief executive before joining Westpac earlier this year. St.

George Chairman John Curtis said the bank's board believed the deal would create significant value for its shareholders "by allowing the bank to benefit from a stronger financial base of a much larger group." The board would recommend the offer to shareholders if an independent expert confirmed it was their best interests.

The banks have signed an agreement for a two-week exclusivity period, during which they will undertake due diligence and negotiate the deal's terms, the banks said. Australian banks have been highly profitable in recent years, but the so-called "big four" banks Westpac, Commonwealth, National Australia Bank and Australia & New Zealand Banking are prevented by government policy from merging.

Analysts have speculated for years St. George could be a takeover target and that Westpac was the most likely suitor.

"Over the past year, international capital market positions have once again reinforced operating from a position of strength, very robust capital and diverse funding sources," Westpac Chairman Ted Evans told analysts on a conference call. "With those factors in mind, the Westpac board felt that the timing was right to approach St.

George." Analysts say the deal could prompt other big banks to consider a counteroffer for St.

George, or bid for other smaller banks in a race for market share. Shares in smaller banks, including Bank of Queensland and Bendigo & Adelaide Bank rose more than 5 percent on Tuesday.

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