BOQ proposes merger with Bendigo Bank


The Board of Bank of Queensland today announced it has approached the Board of Bendigo Bank Ltd seeking agreement on a conditional proposal for a merger through a Scheme of Arrangement. 


Bank of Queensland is also seeking a recommendation from the Bendigo Bank Board in support of the merger proposal.


Bank of Queensland Managing Director David Liddy said this merger proposal was driven by a compelling logic and rationale for both sets of shareholders.


“Bendigo Bank shareholders are being offered an attractive up-front premium of 25 per cent on a 1 month VWAP through a combination of cash and shares that will also allow Bendigo Bank shareholders to participate in the future growth benefits of the enlarged group.


“BOQ shareholders will own approximately 60% of the merged company, which will bring together two complementary branch banking business models, one franchised based, the other community based, while providing scale efficiencies and improved growth opportunities for both.


“Importantly, our business model will strive to preserve the unique character and particular customer focus of both the current Bendigo Bank and BOQ branch networks and business units, which include business banking, equipment finance and wealth management,” he said.


“We intend to support and grow the current brands across both companies and provide significant investment in new products and IT to provide the back-office support for these two business models to thrive side by side.


“No Community Bank branches or Owner Managed Branches will be closed, in fact we will continue to open branches and our initial combined footprint will be over 575 branches with business banking and equipment finance centres in each state. We intend to continue the investment in community-based enterprises that Bendigo Bank has made over several years to ensure the ongoing sustainability of local communities and economies.


“This merger is important for the future of banking, particularly regional banking, in Australia. It’s about recognising the changing landscape of the Australian financial services sector, and working together to be a more effective force and an alternative for the Australian public.


“It’s about becoming Australia’s ‘big small bank’, with the two highest customer satisfaction banking brands in the country and a national retail network comparable to the major banks,” Mr Liddy said.


Bank of Queensland, which is due to announce its half-year results on April 4, today also confirmed its previously announced market guidance of cash EPS growth of 10-12% for FY2006/07, and highlighted recent APRA data which showed its rate of growth in lending and deposits in 2006 was well ahead of Australian banking system growth rates.1


Proposed merger terms


Under the merger proposal Bendigo Bank shareholders will receive 0.748 Bank of Queensland shares and A$5.50 cash for each Bendigo share.  Based on BOQ’s closing share price of $16.60 on 16 March 2007, the proposal is equivalent to $17.92 per Bendigo Bank share, representing a premium of 36% per cent to the closing price of Bendigo Bank shares on 16 March 2007. 


Based on a BOQ’s 1 month VWAP for the period to 16 March 2007 of $15.62, the proposal is equivalent to $17.18 per Bendigo Bank share, representing a premium of 25% to the 1 month VWAP of Bendigo Bank’s shares for the period to 16 March 2007.


A Bendigo Bank Board recommended scheme of arrangement is Bank of Queensland’s preferred basis for implementation of the proposal. The merger of the two companies through such a scheme would be subject to necessary regulatory approvals.


It is Bank of Queensland’s intention to finance the cash component of the consideration through an underwritten entitlement issue to BOQ shareholders and senior debt.


Merger Rationale


Bank of Queensland believes the merger is predicated on strong rationale for both sets of shareholders including the following:


Bendigo Bank Shareholders

  • 25% premium to the $13.74 one month VWAP of Bendigo Bank’s share price (based on BOQ’s 1 month VWAP)
  • Earnings Per Share accretive for Bendigo shareholders and continued access to synergy benefits through a shareholding in the merged group
  • The opportunity to be part of a merged company valued in excess of $4 billion that will create the benefits of scale while supporting dual business models and all existing brands
  • BOQ plans to grow Bendigo’s successful community based business model through new product development and IT investment
  • Simultaneously Bendigo Bank shareholders will enjoy the benefits of Bank of Queensland’s unique and successful franchise based business model, and above system growth
  • Bank of Queensland plans to maintain Bendigo Bank’s headquarters and its commitment to Bendigo and all its regional communities
  • Bank of Queensland’s IT partner EDS has made a commitment to BOQ to consider establishing a presence in Bendigo as part of its long-term commercial relationship with BOQ
  • Consideration in a tax effective form for Bendigo shareholders via rollover relief for scrip proportion


Bank of Queensland Shareholders

  • Developing the platform for the next phase of growth and for the merged company to become a genuine and sustainable alternative in the Australian banking landscape
  • The merger is expected to be Earnings Per Share accretive in FY08/09
  • The merger is expected to deliver approximately $70 million in cost synergies
  • Under the proposed merger, BOQ shareholders would own approximately 60 per cent of the merged company
  • Under the proposed merger BOQ Managing Director David Liddy will manage the merged group
  • Creation of an S&P / ASX 100 company
  • Entitlements issue to be made to all existing BOQ shareholders


Mr Liddy said: "Importantly for Bank of Queensland shareholders, the merger proposal is in line with our stated strategy of pursuing opportunities which are earnings per share accretive.” 


Board composition 


As part of the proposal Bank of Queensland intends to invite five Bendigo Bank Board members to join an enlarged merged company Board, with Mr Liddy in the role of Managing Director.


Subject to securing the cooperation of the Bendigo Bank Board, Bank of Queensland intends to progress negotiation of its proposal as quickly as possible and will keep the market informed of substantive developments.


Bank of Queensland has retained ABN AMRO as financial advisers and Clayton Utz as legal adviser.


View the BOQ - Bendigo Bank merger proposal Investor Presentation

1 (1) APRA Stats Jan-06 to Dec-06: BOQ achieved year on year growth in total lending of 22.8 % and year on year  growth in total deposits of 21.0% (system growth 13.4% and 15.9% respectively)