The institutional fund raising by Bank of Queensland to help fund its $1.325 billion purchase of ME Bank seems to have wasted a lot of value – $60 million or more judging by the 9% jump in the price of BoQ shares on Tuesday.
The market took the news of the successful raising of $673 million from institutional investors and quickly ran the shares higher, handing those investors who took up the issue a nice profit, and in doing so suggested the offer was under priced at $7.35 each.
Yesterday’s rise suggests the issue price should have been closer to $8 a share.
The issue price was a 12.6% discount compared to BOQ’s closing price of $8.41 on Thursday, February 18.
Yesterday the shares hurtled past that close on a hope and a prayer that the merged banks would turn into a mini version of the Big Four.
They closed Tuesday at $9.21, up 9.5%, giving a nice immediate profit for all those who subscribed to the issue.
The bank on Tuesday said it had raised $323 million through an institutional entitlement offer, which was taken up by 98% of eligible shareholders. It also raised $350 million through an institutional placement.
Chief executive George Frazis said the bank had received strong support from its big investors for the $1.325 billion takeover of ME, which the bank says will allow it to more aggressively compete with the major banks.
“We believe that this transformational merger creates a compelling proposition with significant scale benefits through the alignment of operating models and our technology roadmaps,” Mr Frazis said.
BoQ plans to raise a further $680 million in equity capital through an underwritten entitlement offer for retail shareholders.
That will be the big test for the deal.