Westpac Banking Corporation Ltd says it is well placed to move ahead with its proposed $17 billion merger with St George Bank Ltd after St George said its board would recommend the bid to shareholders.
The endorsement came after St George and Westpac signed a merger implementation deal that reflects the key commercial terms that have been agreed upon by both boards and under which the merger proposal will be put to a vote of St George shareholders.
“It (the merger implementation agreement) sets us well to move forward with St George to tackle the next step,” Westpac chief executive Gail Kelly said.
“We have an unparalleled opportunity to create the leading financial services institution in Australia and New Zealand.
“We are bringing together two organisations with complementary strengths and complementary cultures.
“We will be retaining and indeed, over time, enhancing the St George and Westpac brands and distribution networks.”
“We will be drawing from the best of both to enhance service for customers.”
Ms Kelly said the merger would be value-enhancing for shareholders and would be earnings per share-accretive within three years, with strong accretion thereafter.
“With regard to integration risk, we believe we are well placed.”
The St George board intends to recommend to its shareholders Westpac’s offer of 1.31 Westpac shares for each St George share.
The recommendation is subject to an independent expert’s report concluding the offer is in the best interests of St George shareholders and no superior proposal emerging.
Westpac chief financial officer Phil Coffey said the pre-tax cost savings from the merger would be equivalent to 20 to 25 per cent of the St George cost base from common infrastructure and economies of scale.
He said the savings would be sourced from the combined group and would be fully realised by year three.
Mr Coffey said Westpac had made an allowance for $700 million in integration and transition costs.
Ms Kelly said the next step would be to start a joint process of integration planning which would get under way over the next few days.
“We expect the merger process to be completed within six months,” she said.
Mr Coffey said Westpac would incur transaction costs of about $50 million in relation to the merger.
Ms Kelly said Westpac would be seeking to expedite the regulatory process for the merger.
Asked by market analysts if Westpac had a fall-back position should another party make a competing bid for St George, Ms Kelly said: “Of course we do”.