ANZ inks $4.9 billion deal to buy Suncorp Bank

Move includes $47 billion of home loans

ANZ inks $4.9 billion deal to buy Suncorp Bank

ANZ Bank has entered into an agreement to buy Suncorp Bank from Suncorp Group Limited, for a purchase price of $4.9 billion.

The deal would accelerate the growth of ANZ’s retail and commercial businesses and improve the geographic balance of its business in Australia, the bank said.

The acquisition is to be funded by a fully underwritten one for 15 pro-rata accelerated renounceable entitlement offer (entitlement offer), to raise $3.5 billion of ordinary equity and by existing capital. Under the entitlement offer, eligible institutional and retail shareholders will be entitled to subscribe for one new ANZ share for every 15 ANZ shares held on the record date of 7pm (Melbourne time) on 21 July 2022 (record date).

The acquisition includes $47 billion of home loans with a strong risk profile, $45 billion in high quality deposits and $11 billion in commercial loans, ANZ said.  

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ANZ CEO Shayne Elliott (pictured above) said the acquisition would be a “cornerstone investment” for ANZ, and was a vote of confidence in the future of Queensland.

“With much of the work to simplify and strengthen the bank completed, and our digital transformation well-progressed, we are now in a position to invest in and reshape our Australian business. This will result in a stronger more balanced bank for customers and shareholders,” Elliott said.

Having admired the transformation that occurred under the leadership of Steve Johnston and Clive van Horen, given its culture, risk appetite and customer focus, he said he believed Suncorp Bank was a “natural fit” with ANZ.

“ANZ has licenced the Suncorp Bank brand for five to seven years and we are committed to maintaining its current branch footprint in Queensland for at least three years post completion,” Elliott said.

“This is a growth strategy for ANZ, and we will continue to invest in Suncorp Bank and in Queensland for the benefit of all stakeholders.”

Suncorp Bank will continue to be led by CEO Clive van Horen. He will report to ANZ CEO Shayne Elliott and will join ANZ’s executive committee following completion of the acquisition.

Suncorp Bank will initially operate under its existing Authorised Deposit-taking institution licence, with no changes to the total number of Suncorp Bank branches in Queensland, for at least three years from completion, ANZ said.

For team members, ANZ said it would be “business as usual,” with no planned changes to employment conditions. The acquisition would not result in any net job losses in Queensland for Suncorp Bank, for at least three years.

“Importantly, the same great staff that serve customers today will serve customers tomorrow as members of the Suncorp Bank team and we are committed to building on the great service customers have already been experiencing,” Elliott said.

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In a statement to ASX, Suncorp Group Limited said Suncorp’s insurance operations in both Australia and New Zealand would not form part of the transaction.  The group’s head office would continue to be based in Queensland.

Suncorp Chairman Christine McLoughlin said the proposal was assessed through the lens of creating value for shareholders, and to ensure there was an “alignment of purpose and values” and “positive outcomes for people and customers”.

“Suncorp Group, which is the proud home of several of Australia and New Zealand’s leading and most trusted insurance brands including AAMI, GIO, Shannons, Apia and Vero, and of course the Suncorp brand, will continue to offer the same great service to Queenslanders,” McLoughlin said.

Both businesses would benefit from a “singular focus” on their growth strategies and investment requirements, McLoughlin said.

“We believe the agreed price fairly values the Bank and reflects the hard work of our people and progress made on delivering our strategic objectives.”

Suncorp Group CEO Steve Johnston said as a dedicated insurance business, Suncorp would be “singularly focused” on meeting the needs of its customers and communities at a time when the value of insurance had never been greater.

“We acknowledge the needs of insurance customers are rapidly changing, with a preference for digital interactions and for product design to take into account personal circumstances and risk profiles. At the same time, the external environment has seen more frequent and severe natural hazard events resulting in increased costs and affordability challenges,” Johnston said.

“Suncorp will continue to be at the forefront of advocating for a more resilient Australia and for all levels of Government to focus on mitigating the impacts of major weather events through improved public infrastructure, subsidies to improve private dwellings and an overhaul of planning laws.”

As part of its commitment to Queensland, ANZ has undertaken to allocate $15 billion of new lending as part of its existing renewable lending commitments, to support renewable projects and green Olympic Games infrastructure, over the next decade.

The bank said it has also committed $10 billion of new lending for energy projects, particularly those targeting bioenergy and hydrogen. It also intends to make $10 billion of lending available to support Queensland businesses over the next three years.

“ANZ is committed to making a meaningful contribution to the economic and social prosperity of Queensland and today’s announcement will see ANZ increase its presence, and we believe improve competition, in one of Australia’s most important regions,” Elliott said.

“Since March 2020, Queensland has recorded better economic growth, better workforce participation and more interstate migration than any other state or territory in Australia. It contributes 18% to Australia’s GDP and we believe we can use the resources at our disposal to further contribute to its continued success.”

With the first ANZ branch opening in Brisbane in 1851, Elliott said the bank had since built a great business in Queensland, particularly in institutional banking.

“While we have an outstanding team already supporting our customers, we recognise in order to provide better services and improve competition for all Queenslanders we need to build on our existing retail banking presence,” Elliott said.

“We know there will rightly be questions from Government and regulators about the competition aspects of this transaction. As the smallest of the major banks, we believe a stronger ANZ will be able to compete more effectively in Queensland offering better outcomes for customers.”

ANZ would look to use its experience in sustainable finance to support Queensland’s ambition to reduce carbon emissions and would provide funding for the Brisbane 2032 Olympics green infrastructure.

“While we already play a key role in supporting Queensland customers, particularly those exporting goods overseas, we recognise our role in assisting the State as it transitions to a lower carbon future. This is a key reason why we have set aside $15 billion of new lending to support the Government’s ambition of 50% renewable energy by 2030 and green infrastructure for the 2032 Olympic Games,” Elliott said.

The entitlement offer is to be conducted at $18.90 per new share, which ANZ said represents a 12% discount to the theoretical ex-rights price (TERP) of $21.47 and a 12.7% discount to ANZ’s last closing share price of $A21.64 on 15 July 2022.

Approximately 187 million new shares are to be issued under the entitlement offer, which ANZ said represents around 6.7% of its existing shares on issue.

The acquisition is subject to a minimum completion period of 12 months.

It is subject to approval from the Federal Treasurer, authorisation or approval from the Australian Competition and Consumer Commission, as well as certain amendments to the State Financial Institutions and Metway Merger Act 1996 (QLD).

The transaction is expected to complete in the second half of 2023.