The Australian Competition Tribunal will begin a nine-day hearing on Monday, 4 December on the applications by ANZ and Suncorp for a review of the ACCC’s recent decision to refuse authorisation for the takeover by ANZ of Suncorp Bank.
There are two central issues before the tribunal: the degree to which coordination among major banks may increase once ANZ buys Suncorp Bank; and the likelihood and plausibility of the ACCC’s favoured counterfactual – an alternative offer by Bendigo and Adelaide Bank for Suncorp Bank.
This latter topic is generating plenty of heat in submissions so far filed with the tribunal.
In its submission, Bendigo reminded the tribunal that “Bendigo has strong incentives to merge with Suncorp Bank in order to increase its scale and improve its competitiveness.
Rebuffing widely held cynicism on the commercial prospects for any offer, Bendigo said: “Bendigo’s interest in Suncorp Bank is not speculative, opportunistic or lacking detail.
“Prior to the announcement of the proposed acquisition, Bendigo was preparing to make an offer to merge with Suncorp Bank, had done significant work to ensure it was well-positioned to make a binding offer to acquire Suncorp Bank, and was seeking to engage substantively with Suncorp Group to make such an offer.”
Bendigo assured the tribunal that “Bendigo’s offer would or would likely be compelling.
“A Bendigo-Suncorp Bank merger would be value accretive to both Bendigo and Suncorp Group shareholders, and the merged Bendigo-Suncorp Bank would have significant synergies.
“Bendigo would or would likely have access to adequate funding to make a binding offer.”
For its part, the studiously-disinterested Suncorp contends in its submission that “there is no realistic commercial likelihood that, in the relevant timeframe, Bendigo would acquire Suncorp Bank and become a materially more effective competitor”.
Suncorp said “any offer by Bendigo to acquire Suncorp Bank likely would be comprised wholly or mostly of Bendigo scrip”.
As a result, Suncorp said “Suncorp Group’s board would need to consider the likely value of the merged Bendigo and Suncorp Bank before it could approve or recommend the sale.
“The value of a merged Bendigo and Suncorp Bank likely would be adversely affected by significant funding cost dis-synergies under Bendigo ownership.
“Realising any synergies would be difficult, and more difficult than suggested by analyses prior to the current year, including because of difficulties in closing branches, reducing offices, or reducing headcount. “
Finally, Suncorp said: “Suncorp Group’s board would not approve or recommend a sale to Bendigo unless the consideration offered exceeded Suncorp Bank’s current value based on its present organic plan before factoring in the benefit from unwinding any conglomerate discount that presently applies to Suncorp Group’s share price.”
ANZ argued in its submission that Bendigo acquiring Suncorp Bank “would be earnings dilutive for Bendigo shareholders if Suncorp Bank were sold at the multiples at which Bendigo trades.
“For a combined Bendigo-Suncorp bank to achieve earnings neutrality within the next two years, Suncorp Bank would need to be sold to Bendigo at a value which is significantly below this level, being significantly less than the value which would be delivered by way of the proposed acquisition or the value generated by way of Suncorp Group continuing to operate Suncorp Bank.
“An offer by Bendigo to acquire Suncorp Bank with a consideration that is equal to or exceeds Suncorp Bank’s current value (calculated by reference to its present organic plan) would likely be significantly value dilutive for Bendigo’s current shareholders, who would therefore be unlikely to approve the acquisition.”
It is now 20 months since ANZ lodged its A$4.9 billion cash offer for Suncorp Bank.
A final ruling by the Australian Competition Tribunal is unlikely before late March 2024.