BoQ Raising Leaves Plenty on the Table

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.

Glenn Dyer

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.

View more articles by Glenn Dyer →