Mackay Permanent recommends $53.2 million BOQ proposal


 

Bank of Queensland Limited (BOQ) today announced a recommended proposal (“the Offer”) for all the shares in Mackay Permanent Building Society Limited (“Mackay Permanent” or “MPBS”) which values Mackay Permanent at $53.2 million[1].

 

The Board of Mackay Permanent unanimously recommends that all Mackay Permanent shareholders support the Offer, in the absence of a superior proposal[2]. Mackay Permanent Board members intend to vote in favour of the Offer in relation to their personal shareholdings in Mackay Permanent, in the absence of a superior proposal.

 

The Offer

Under the terms of the Offer, to be effected via a scheme of arrangement, Mackay Permanent shareholders will have the flexibility to choose cash or scrip for some or all of their shareholding. MPBS shareholders can elect to receive:

  • cash consideration of $8.25 per MPBS share; OR
  • 0.5 BOQ shares per MPBS share,

and will also receive a final dividend (comprising an ordinary and special dividend) of an aggregate $1.00 per MPBS share[3].

 

Including the final dividend, the cash offer represents total consideration of $9.25 per share[4] and the scrip offer is valued at $9.70 per share (based on the BOQ share price of $17.40 at close of market on August 13, 2007). Through the final dividend, shareholders should be able to access franking credits to the value of 43 cents per MPBS share.

 

Preference shareholders will receive value for their shares as part of the merger proposal.

 

The Offer[5] represents a substantial premium of:

  • 15.6% to Wide Bay Australia Limited’s (“Wide Bay”) proposed cash offer price of $8.00 per share announced on 24 July 2007; and
  • 32.1% to Mackay Permanent’s closing share price of $7.00 on 23 July 2007, being the day immediately prior to the announcement by Wide Bay of its proposed offer for Mackay Permanent.

 

Mackay Permanent Chairman, Richard Wallace, said “Bank of Queensland’s proposal offers the best opportunity for future growth for Mackay Permanent’s shareholders and other stakeholders in a larger entity which has proved to be a strong market performer.

 

“We believe the BOQ proposal is superior to the other proposal currently being offered,” he said.

 

Bank of Queensland Chairman Neil Roberts welcomed the support of the Mackay Permanent Board.

 

“This structure provides MPBS shareholders with the ability to elect to continue to participate in the future growth of BOQ as well as access to potential tax advantages via CGT roll-over relief and the distribution of franking credits through the special dividend,” Mr Roberts said.

 

“Bank of Queensland has shown through its merger with Pioneer that it is the right partner for Mackay Permanent Building Society and understands the sensitivities of bringing together two strong Queensland financial institutions.

 

“The proposal is expected to be cash Earnings per Share (EPS) accretive for Bank of Queensland in FY2008,” Mr Roberts said.

 

Bank of Queensland Managing Director David Liddy said the merger proposal would further strengthen BOQ’s growing presence in Central and North Queensland followings its merger with Mackay-based Pioneer Permanent Building Society in November last year.

 

“Bank of Queensland has already shown its commitment to the Mackay region, and to Queensland as a whole. This proposal would continue our drive to have the largest branch network in our home State and enhance our strong growth in customer numbers nationally.

 

“Importantly for the people of Mackay, we have already established a regional headquarters in the city and a successful merger with Mackay Permanent would allow us to offer even more services and points of presence for the people of this fast-growing region,” Mr Liddy said.

 

“BOQ’s offer also provides an opportunity for Mackay Permanent shareholders to join in the Bank of Queensland success story which has seen significant growth in shareholder value and Total Shareholder Returns (in excess of 24% per annum over the last five years).

 

“This merger proposal would allow Mackay Permanent shareholders to jump on board the growth story that is Bank of Queensland as we continue our drive to be Australia’s best customer service bank,” Mr Liddy said.

 

“As I have said previously, the Central and North Queensland region is one of the strongest economies in Australia and Bank of Queensland intends to be a major partner in the future growth of the region.

 

“I know that the customers, staff, shareholders and community partners of Mackay Permanent would recognise a similar focus on local support, customer service and successful growth that they have enjoyed with Mackay Permanent.

 

“They would also have access to the latest in banking products, more than 2200 ATMs and 220 branches nationally and state-of-the-art electronic banking,” he said.

 

“I believe we have shown with our successful mergers and acquisitions over the last five years that we know how to undertake an integration of this type with sensitivity while maximising the strengths of both organisations.” 

 

Benefits to MPBS shareholders

  • It represents a premium over the Wide Bay offer announced on 24 July 2007;
  • Potential Capital Gains Tax roll-over relief available to MPBS shareholders who elect to receive BOQ shares rather than cash as part of the Offer consideration;
  • The offer has been structured to provide MPBS shareholders with an aggregate $1.00 fully-franked dividend (comprising final and special dividends), realising surplus franking credits of 43 cents per share to enhance value to shareholders (subject to regulatory approval); and
  • Ability to participate in BOQ shares which offer increased liquidity relative to MPBS’ current share trading liquidity.

 

Benefits to BOQ shareholders

  • Expected to be cash EPS accretive in FY08;
  • Greater branch presence in the booming Central and North Queensland economies; and
  • Continued growth of Queensland-based branch network which is performing above national averages.

 

Merger Implementation Agreement

BOQ and Mackay Permanent have entered into a Merger Implementation Deed under which they have agreed to proceed with the offer by way of a scheme of arrangement between MPBS and its shareholders. The deal is subject to support of MPBS shareholders, regulatory and court approvals, satisfactory completion of due diligence over the next three weeks and other conditions customary for a public transaction of this nature.

 

The scheme of arrangement is expected to be implemented by late November or early December 2007. Further details of the Merger Implementation Deed are contained is the attachment to this announcement.

 

Bank of Queensland

Bank of Queensland is Australia’s fastest growing regional bank with more than 220 branches throughout every State and Territory in Australia. In the last five years it has more than doubled its branch numbers, its assets under management have more than trebled to almost $20 billion while its market capitalisation has grown from approximately $400 million to $2 billion. Bank of Queensland has won Best Regional Bank in the AB&F Banking and Finance Awards twice in the last five years and is recognised as one of the highest customer service banks in the country.

 

Mackay Permanent Building Society

Mackay Permanent Building Society Limited was formed in 1955 and has 21,000 member accounts and total assets of $371 million. Based in the central Queensland city of Mackay it has 12 branches and 14 agencies from Rockhampton to Mackay, the Whitsundays and Townsville.

 

Advisers

BOQ is being advised by ABN AMRO as financial adviser and Clayton Utz as legal adviser. MPBS is being advised by PricewaterhouseCoopers as financial adviser and McCullough Robertson as legal adviser.

 

Merger Implementation Deed Key Terms and Conditions (PDF 93kb)

 

[1] Based on ordinary shares outstanding of 5,748,762.
[2] The recommendation of the Directors of Mackay Permanent is also subject to the opinion of an Independent Expert that the offer is in the best interests of Mackay Permanent shareholders.
[3] There may be timing differences between the payment dates for the ordinary and special dividend. The special dividend to be paid on implementation of the scheme of arrangement will be reduced by the amount of any ordinary dividend paid earlier (see the Merger Implementation Deed summary in the attachment for further details).
[4] Based on the cash consideration of $8.25 per share and final dividend of $1.00 per share.
[5] Based on total cash consideration of $9.25 per MPBS share.