Distant target suits MyState
MyState managing director John Gilbert is confident the Tasmanian group's extensive product set will appeal to the customer base of The Rock Building Society, based on Queensland's Capricorn Coast.The opportunity to beef up The Rock's limited offering by using MyState's products and services is one of the main arguments for the planned takeover of the former by the latter, which was announced yesterday.MyState is offering 7.75 of its shares for 10 shares in The Rock. The offer values The Rock at A$2.71 a share - a 40 per cent premium over The Rock's one-month volume weighted average price prior to the announcement. MyState shareholders will own 78 per cent of the merger entity if the deal proceeds.The merger is by way of a scheme of arrangement that will have to be approved by The Rock's shareholders. Court and regulatory approvals will also be needed.Gilbert said: "We are both regional operators. MyState is a strong player in its market and we like the potential of The Rock's brand in its region."MyState can add business finance products, agribusiness banking, a bigger suite of consumer lending products, wealth management and trust company services to The Rock's offering.If the deal goes ahead the combined financial institution will have a notional market value of $282 million, $2.85 billion of loans, $2.2 billion of deposits and $924 million of funds under management. It would rank as the seventh biggest non-bank approved deposit-taking institution in Australia.Gilbert argues that MyState has skills in merger integration. MyState, which demutualised in 2009, acquired Tasmanian Perpetual Trustees as part of its shedding of its credit union roots. Gilbert said the merger synergies forecast at the time of the TPT acquisition have been achieved and the group now reports significant levels of cross-sell between the two businesses.However, specialist lender FirstMac has a six per cent shareholding in The Rock and this could prove a hurdle to the progress of the deal.Gilbert said he expected The Rock's management would have dealt with such issues as part of its planning to enter into a scheme of arrangement.Mecu Limited, a large Melbourne credit union that is now trading under bank branding, has also been moving up the register of MyState.Other financiers might yet seek the support of the board of The Rock for an alternative offer.An obvious alternative bidder is Wide Bay Australia, based in Bundaberg. Wide Bay acquired Mackay Permanent Building Society three years ago.Ron Hancock, chief executive of Wide Bay, said yesterday that his board had considered the case for a bid for The Rock in the past.But, Hancock said, the ballooning costs of the new core banking system at The Rock - disclosed as standing at $9.5 million in the latest financials and likely to be written off by any buyer - was one factor to consider.Another is recent revisions to accounting standards that require costs related to the closure of branches in any takeover to be recognised through the profit statements, rather than as an adjustment to the cost of acquisition.For