Situations: E*Trade, APN, BOQ

By Glenn Dyer | More Articles by Glenn Dyer

If the ANZ Banking Group wants to complete its takeover of online broker, ETrade Australia, it will have to boost the value of its offer to more than $430 million, from the present figure of $407 million.

That’s after the ANZ’s offer suffered the rare indignity of being labelled neither fair nor reasonable in an independent expert’s report.

Rebuffs such as this are rare and with the ANZ facing opposition from several shareholders led by hedge fund Caledonia Investments and rival online operator IWL Ltd, the offer in its present state is dead.

Much like the offer for Qantas from Airline Partners Australia.

Grant Samuel & Associates valued ETrade Australia in a range of $4.22 to $4.74 per share, compared to the ANZ’s offer of $4.05 per share.

ANZ is trying to buy the remaining 65.8 per cent of shares in ETrade and lifting its price to within the range in the GS report would mean paying an extra$17 million to $69 million on top ofthe $407 million valuation the bank’s offer has placed on ETrade.

ETrade said “The independent expert has valued ETrade Australia in the range of $4.22 – $4.74 and has concluded that the ANZ Offer is neither fair nor reasonable.

“The independent directors of ETrade Australia, Kerry Roxburgh, James Dominguez, Ian Hunter and Brett Spork, are now reviewing their earlier recommendation.”

The independent directors’ recommendation will be included in ETrade’s targets statement due to be sent to shareholders later this week (on March 29).

“The independent directors recommend that shareholders take no action in relation to the ANZ offer until after they receive the Targets Statement,” ETrade said.

The ANZ offer will not close until April 18 at the earliest and as IWL stake owns just under five per cent and Caledonia Investments has 12.5 per cent, unless there’s a much higher price (which the ANZ says won’t happen) then ETrade seems destined to remain a listed company for the next few months.

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Meanwhile no sign of progress on the buyout offer for regional media and metro radio group, APN News & Media Ltd.

It’s controlled by Irish billionaire Tony O’Reilly and his family, and his group’s offer with private buyout groups from the US (Providence Equity Partners and Carlyle) has run into opposition from major shareholders just as Qantas and and ETrade have.

The APN has agreed to recommend an increased offer of $6.10 per share for all the shares in APN from the consortium of the Tony O’Reilly interests in comprising Independent News & Media PLC (35 per cent), Providence Equity Partners (37.5 per cent) and The Carlyle Group (27.5 per cent).

But it needs to secure the support of big shareholders, Perpetual Investments and Maple-Brown Abbott, who own about 23 per cent of the company. They are not happy with the price.

That’s more than enough to block it and John Sevior, head of Australian Equities at Perpetual, has describedthe bid “too low to be successful”.’

APN shares finished at $5.83 on Friday. The shareholders meeting will be held next month.

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And Bank of Queensland Ltd (BoQ) managing director David Liddy was out and about flogging the virtues of his surprise $2.46 billion offer for regional rival, Bendigo Bank with what people in the market are calling the “Mandy Rice Davies approach” or, “well he would say that wouldn’t he?”.

Appearing on a Pay TV business show yesterday it was a predictable pastiche of hard sell and big picture opportunism.

He said he expects more consolidation in the banking sector and says the government’s four pillars policy stopping Australia’s big four banks from merging is all but dead.

Mr Liddy told the Sky Business program that”I believe very firmly that consolidation is going to occur in our industry, and I think the merger of two of the best regional banks in Australia to create a much bigger banking force and a real alternative with a footprint that’s equal to the majors makes a lot of sense”.

He said the proposed merger of BoQ and Bendigo Bank made sense because consolidation was inevitable.

“I think ‘four pillars’ has served a useful life,” Mr Liddy said.

“I think that it’s at the end of its useful life today, and I think that (view) is shared by many.”

Mr Liddy also said the banking sector had become increasingly competitive.

“I don’t think it’s ever been as competitive in banking as it is today.”

And Mr Liddy said the community bank model used by the Bendigo Bank would continue if the merger happened.

“We’re going to continue with the community branch model, we’re not going to close any community branch models, we’re going to continue to invest in a community model,” he said.

Well, as they say in the market, ‘he would say that’.

The fact of the matter is that unless there is a bid for a big Australian bank from overseas, four pillars is not going to change, especially if Kevin Rudd leads the ALP to victory in the federal election this year.

Equally The Big Five Australian banks have more invested in New Zealand than they would have in rural and regional Australia in terms of actual physical assets: they own 80 per cent of that country’s banking industry and if you were looking for a deal, a sell down of one of the big four there might be more likely to happen than a move on each other here or on a regional bank.

There are really only three regional banks: BOQ, BEN and Adelaide Bank (ADB). All three have very different business models which would be hard to graft onto a larger bank, let alone merge with one or two regional competitors.

Coming from Westpac to the Bank of Qld, Mr Liddy would know how takeovers of smaller banks by big ones like Westpac, destroy value.

Westpac has none of the additional market share it bought when taking over Challenge Bank in Perth and Bank of Melbourne.

Why

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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