Bank of Queensland and ME Bank have finalised terms for a sale of the Melbourne-based bank, with full details expected to be announced this morning.
ME Bank’s 26 industry fund shareholders are set to collect A$1.325 billion in cash under the deal and additional “adjustment payments” linked to changes in the target bank’s capital in the next six months.
Sources close to the transaction said the final sale price could exceed $1.4 billion depending on movements in ME Bank’s common equity tier one position up to the end of August.
It is believed that ME’s board will also declare a maiden dividend payable to its shareholders for the six months to the end of December that will be fully franked.
The ME shareholders, including the country’s largest industry super funds - Australian Super, CBus and HostPlus – are also in line to receive a final dividend for the six months to the end of June.
BoQ requested a halt to trading in its shares last Thursday pending further announcements relating to a planned institutional share placement and retail entitlement offer.
The bank said in an ASX filing the equity raisings were being undertaken to fund a potential acquisition.
Banking Day understands that BoQ’s institutional shareholders, which include global fund manager Vanguard, are likely to support the proposed equity raisings.
While the strategic logic underlying the deal is compelling for many reasons, an immediate benefit will include potentially material technology synergies because both banks operate on the same core banking platforms.
Another immediate benefit would be the de-risking of BoQ’s lending profile, which is disproportionately exposed to the Queensland economy.
The purchase is transformational for the Brisbane-based bank, which has struggled in the last decade to match the loan and deposit growth of other mid-tier ADIs such as Bendigo Bank, Macquarie and cross-town rival, Suncorp.
As a deposit taker BoQ will overtake Suncorp and be on an equal footing with Bendigo after the ME acquisition is completed.
BoQ’s current deposit base of around $36 billion will rise to almost $56 billion.
The acquirer’s total loan assets, which currently stand at around $41 billion, are likely to exceed $60 billion with the purchase.