Big 4 bank ANZ is set to takeover Suncorp in a massive buyout. The agreement stipulates that the buyout is only for the banking side of the business with the insurance arm not being apart of the deal.

 

Details of the deal

ANZ is set to pay Suncorp 4.9 Billion dollars 1.3 time the current Net Tangible Asset value of Suncorp. The completion and integrating process is likely to take between 5-7 years. ANZ will also pay a 50-million-dollar licensing fee for the use of Suncorp’s branding for up to 5 years. This licence can be extended for another 2 years with an additional fee of 10 Million dollars per year if needed. The deal is expected to bring about a net gain of 4.1 Billion dollars which the company intends to return to its shareholders. To fund the acquisition, ANZ will raise 3.5 Billion dollars via a retail a placement, at a price of $18.90 per share.

 

Potentially regulatory hurdle

The deal will still have to supervised by the ACCC. The ACCC will have to be satisfied that the deal does not substantially lessen competition. Some legal experts say the deal will likely still be given the ok, the ACCC will do say begrudgingly. However, it is still an important obstacle that needs to be satisfied.

Impact on Suncorp

The deal will allow the company to better focus on their insurance business and simplify the organisation. Their insurance arm includes brands such as APIA, Bingle and AAMI. The premium will also allow for the share price of SUN has saw a nice gap up in price on the morning of the announcement with an almost 6% jump.

Impact on ANZ

The merger has the potential to really propel ANZ forward, especially in a tough market for banks with the impending threat of a recession. The acquisition is expected to increase ANZ’s retail and commercial earnings by 10%. ANZ CEO, Shayne Elliott stated that the acquisition “will be a cornerstone investment for ANZ and a vote of confidence… This is a growth Strategy for ANZ, and we will continue to invest in Suncorp Bank.” Finding extra revenue sources especially in such a competitive industry may act as an important point of strength in such a tough current market. The ANZ share price remains in a halt until Thursday 21 July.