The move will double its retail bank and provide geographic diversification, says CEO
The ACCC has approved the deal, with chair Rod Sims saying the combination could disrupt the status quo of the big four.
The acquisition will be for cash consideration of $1.325bn and funded by an underwritten capital raising of $1.35bn.
Chairman of BOQ, Patrick Allaway, said the announcement was a major step in the bank’s strategy to be the leading customer-centric alternative to the big banks.
“With the addition of the ME Bank business, BOQ now has material scale and a compelling growth platform to support this ambition,” he added.
“The combination of our highly complementary businesses brings together two organisations with a shared purpose and values generating greater value for customers, employees and shareholders. This is underpinned by the successful revitalisation of the bank since early 2020 with the team’s strong execution capabilities being reflected in our earnings progress to the half.”
Managing director and CEO George Frazis added that the ME Bank brand was a great fit with both the BOQ and Virgin Money brands and that it would double its retail bank, increase Retail earnings contribution from approximately 36% to greater than 50%, and provide geographic diversification.
“This is a defining acquisition in our ongoing transformation of BOQ, benefitting our shareholders, customers, and people,” said Frazis.
“It is an exciting day to see two strategically and culturally-aligned businesses come together and we look forward to continuing to build ME Bank’s strong brand, accelerate growth and create new opportunities for our people and the Group.
“We are on track with our strategic transformation and we anticipate that the combination of the two businesses will enable us to accelerate our digital strategy towards a cloud based common digital Retail bank technology platform.”
Combined, the Group will have pro forma total assets over $88bn with total deposits of more than $56bn.
The acquisition price represents an implied acquisition multiple of 1.05x ME’s FY20 reported book value and 11.9x ME Bank’s FY20 cash underlying earnings.
Completion of the acquisition is targeted before the end of BOQ’s 2021 financial year, subject to regulatory approval pursuant to the Financial Sector (Shareholdings) Act 1998 (Cth).