The big market news today was that massive big four bank ANZ after almost a decade of attempts signed a deal to buy the Suncorp Bank division for $4.9 billion as it expands its operations in the Queensland market.
To help pay for the purchase, ANZ is looking to raise around $3.5 billion through a fully underwritten entitlement offer which will allow investors to buy one new share for every 15 shares held. New shares will be offered at $18.90 — a 12.7 per cent discount to ANZ’s last trading price which was last Friday’s closing price.
Under the deal, Suncorp’s banking arm will continue to operate under Suncorp brand for five years and will continue to be led by CEO Clive van Horen. Under the terms of the deal, ANZ will operate Suncorp Bank under its own ADI licence and there will be no changes to the total number of Suncorp Bank branches in Queensland or employee numbers for over 36 months post the deal completion date.
ANZ CEO Mr. Elliott said:
“With much of the work to simplify and strengthen the bank completed, and our digital transformation well-progressed, we are now in a position to invest in and reshape our Australian business. This will result in a stronger more balanced bank for customers and shareholders.”
The deal is targeting an increase in ANZ’s presence in the home loan market, where it is currently the fourth-biggest lender in the country. The Suncorp Bank purchase includes $47 billion in home loans, $45 billion in deposits and $11 billion in commercial loans.
Suncorp said the purchase continued to reshape and simplify the group and positioned both its insurance and banking businesses for ongoing growth.
Suncorp Chairman Christine McLoughlin stated:
“Both businesses will benefit from a singular focus on their growth strategies and investment requirements… “We believe the agreed price fairly values the bank and reflects the hard work of our people and progress made on delivering our strategic objectives.”
After announcing the details of the deal, ANZ announced a third quarter update to bolster investor sentiment, with quarterly revenue increasing 5%. Deposits were flat excluding foreign exchange impacts.
Pleasingly, the bank’s group net interest margin (NIM) increased 3 basis points. This was largely driven by the impact of rising rates, partly offset by intense price competition in the home lending portfolios in Australia and New Zealand. As with all major corporate deals that occur in Australia, this will still require approval from the Australian Competition and Consumer Commission (ACCC).
Further to this, ANZ has pulled out of discussions with KKR about a potential purchase of accounting software group MYOB. No further details were released about the deal. Finally, as a conclusion to the details in the announcement, ANZ is currently in a trading halt while the company completes its $3.5 billion capital raise to fund this purchase.