Westpac Banking Corp yesterday said it had approached rival St. George Bank Ltd with a A$15 billion (US$14 billion) takeover offer that could be the biggest shake-up of Australia’s bank sector in years.
The deal would create Australia’s largest financial services firm in terms of market capitalization, valued at almost A$64 billion, based on Friday’s closing prices.
“St. George and Westpac are two highly successful banks, but we believe they would be stronger together in a way that allows both to harness the strength of each, while maintaining their unique identities and market positions,” Westpac chairman Ted Evans said in a statement.
Westpac said its proposal is for an all-equity deal, but it didn’t provide any details on the value of the proposed transaction. At the close of trading on Friday, St. George’s market capitalization was A$14.95 billion.
St. George said in a statement that it received Westpac’s approach on Friday, and that it expected to make a further announcement before the start of trade today.
Trading in Westpac and St. George shares was halted just before the announcement.
Westpac’s new chief executive, Gail Kelly, a former chief executive of St. George, said a combined group would more effectively compete with rivals Commonwealth Bank of Australia, Australia and New Zealand Banking Group Ltd (ANZ) and National Australia Bank Ltd.
“The increased scale and integration of operations would drive further investment in our back office processes ensuring more reliable, consistent and improved customer service,” Kelly said.
Westpac is Australia’s third-largest bank by market capitalization. It and the Commonwealth Bank, ANZ and National Australia Bank form the country’s “big four” banks.
Stocks in other banks surged as investors speculated that a St. George takeover could prompt other big banks to seek acquisitions to shore up their market positions.
“What it will do is open up a whole can of worms for the whole sector,” said Peter Rice, an analyst for trading firm BBY. “Suddenly Westpac will swamp NAB and Commonwealth Bank, so if I was them I’d be looking at options to get back up the totem pole.”
NAB shares rose almost 4 percent in the first two hours of trade.
Commonwealth and ANZ shares rose about 2 percent. Smaller banks also rose, with Bank of Queensland up 3 percent.
The takeover requires approval of a range of regulatory authorities, as well as Australian Treasurer Wayne Swan. Regulators did not immediately comment on Westpac’s bid.
For years, analysts have speculated that St. George — Australia’s fifth-largest bank by market capitalization — could be a takeover target. The group is outside the “big four,” which are prohibited from merging with one another under competition rules.
Westpac has long been considered the most likely suitor.