BEN, BOQ To Talk

By Glenn Dyer | More Articles by Glenn Dyer

Bendigo Bank says it’s sticking to what it knows best, community banking, while talking to the Bank of Queensland about its unsolicited $2.46 billion takeover offer.

The Bank of Queensland says it’s happy to have such a response from BEN and will be working “towards a negotiated merger implementation agreement in the coming weeks”.

And that again begs the question why wasn’t a negotiated deal done before the announcement?

On the face of things there’s something missing from the explanation from BOQ and its CEO, David Liddy.

No one goes into a deal this big and this transforming for the company involved without having a very good idea of whether it will succeed. It is a high risk approach andvery ‘un-banker like’.

Failure should mean loss of job for the CEO of BOQ and possibly the chairman. Miscalculations on bids of this size and importance shouldn’t be allowed.

With the stakes so high BOQ shareholders should be wary of a desperate management and board doing more than they should, prudently, to get the deal home to save face.

BEN released a letter it is about to send to shareholders and CEO, Rob Hunt yesterday faced the media and broking analysts and the message in both was calm, steady as she goes and wait and see what we come up with.

BOQ is offering 0.748 of its shares and $5.50 cash for each Bendigo share, valuing the target at about $17.92 per share (as at last Friday’s values) or $2.46 billion.

BOQ shares closed at $16.92 yesterday, up 7c and BEN shares closed down 5c at $17.10. That valued BEN shares at $18.15.

There seems to be some thought that the mild reception given to the approach by Mr Hunt was a signal that the bid might be well received, while other comments suggested there could be a counter bid coming.

But the sticking point remains the very different, community-based model developed by BEN. It might be low-keyed but it does tie the bankto local communities, customers, shareholders and employees.

Here’s the key part from the letter and a clear warning to BOQ, investment analysts, brokers and others who might think price is everything:

“Your Board values the strong support and commitment it enjoys from its shareholders, staff, customers, alliance partners, communities and other stakeholders and will take into account the interests of all stakeholders in considering the proposal.

“We believe these stakeholders have a direct impact on the future value of the business under any ownership scenario.”

That makes it imperative that the bid is friendly and the onus is now on BOQ make it so.

BEN chairman, Robert Johanson (who is a former investment banker at JB Were and now works at Grant Samuel) played it straight in the shareholders letter released to the ASX.

“Bendigo Bank yesterday received a proposal from Bank of Queensland. Under the conditional proposal, Bendigo Bank shareholders would be offered 0.748 Bank of Queensland shares and $5.50 cash for each Bendigo Bank share.

“Bendigo Bank will now engage with Bank of Queensland to obtain more detail about its proposal and to evaluate whether it is in the best interests of our shareholders.

“The current proposal from Bank of Queensland is subject to a number of conditions, including the unequivocal support of the Bendigo Bank Board, Bendigo Bank shareholder approval, the arrangement of finance by Bank of Queensland and satisfactory due diligence by each party on the other. It is likely to be some months before any proposal could be submitted to shareholders.

“In evaluating the Bank of Queensland proposal, your Board is mindful of the significant value and potential that has been created by our current strategy. Bendigo Bank has invested significantly in its business over many years and has created a strong brand, a broad product range, a diversified range of revenues and national distribution network.

“Today, Bendigo Bank is a financial services distribution business represented in more than 350 communities nationally. It has 1.1 million customers and continues to expand its product range to support customer and community needs. The benefits of this investment and expansion are progressively being realised and the extraction of further value from this strategy is expected to result in sustainable earnings growth going forward.

“Bendigo Bank is focused on providing strong sustainable returns to its shareholders and continually reviews opportunities to prudently grow its business. In recent years, Bendigo Bank has held informal discussions with Bank of Queensland and other parties in recognition of the potential for industry consolidation and diversification. As such, your Board will evaluate the Bank of Queensland proposal having regard to all opportunities that may be available.

“We will keep you informed of developments.

“In the meantime, Bendigo Bank’s service to customers, and commitment to its communities, will be unwavering while the proposal is appropriately evaluated.”

In its statement, Band Of Queensland said “BOQ today acknowledged and welcomed Bendigo Bank’s response to a merger proposal through a Scheme of Arrangement.

“Bendigo Bank said today in an ASX announcement it would engage with Bank of Queensland to obtain more detail about its proposal and to evaluate whether it is in the best interests of Bendigo Bank’s shareholders.

“Bank of Queensland Managing Director, Mr David Liddy said Bank of Queensland would work closely with the Bendigo Bank Board to bring the merger to fruition providing the best result for both sets of shareholders.

“This merger is important for the future of banking, particularly regional banking, in Australia. It’s about recognising the changing landscape of the Australian financial services sector, and working together to be a more effective force and an alternative for the Australian public.

“We see this transaction as a

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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