BoQ to buy ME for $1.33b, ramping up competition with big four

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Bank of Queensland is buying ME Bank for $1.325 billion, in a deal it says will double the size of its retail bank and allow it to ramp up competition against the big four.

BoQ on Monday confirmed the deal to acquire ME from its industry fund owners, with BoQ financing the all-cash deal with an underwritten equity raising of $1.325 billion.

George Frazis, CEO of Bank of Queensland, said the deal would deliver sustainable profit growth. Credit:Paul Harris

BoQ chairman Patrick Allaway pitched the deal as a transformative acquisition, and a major step in its plan to be the leading “customer-centric” alternative to industry giants Commonwealth Bank, Westpac, National Australia Bank and ANZ Bank.

“With the addition of the ME Bank business, BoQ now has material scale and a compelling growth platform to support this ambition,” Mr Allaway said.

“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.“

ME Bank, a mortgage lender owned by 26 industry super funds that was launched in the 1990s, said its shareholders had unanimously supported the deal, arguing the two banks were a “natural fit” together.

The deal is priced at 1.05 times ME’s book value, and 11.9 times ME’s underlying profits.Credit:Ken Irwin

ME chairman James Evans said the increase in the bank’s scale would benefit customers and staff, because as a larger business it would be more able to compete with rivals.

“Today’s decision represents a permanent shift for the better in the Australian banking landscape. This agreement brings together two culturally aligned organisations to form what will be an enhanced and influential banking alternative for customers,” Mr Evans said.

“BOQ and ME are a natural fit. They are both home-grown banks with a range of simple and easy to
understand banking products.”

As a result of the merger, which has been approved by the competition watchdog, BoQ will emerge with total assets of $88 billion and total deposits of $56 billion. BoQ will diversify the geographic spread of its customer base, given ME’s strong ties to Melbourne, and the two groups are also working towards operating on a common technology platform.

The deal is priced at 1.05 times ME’s book value, and 11.9 times ME’s underlying profits.

BoQ chief executive George Frazis said the bank expected to realise synergy benefits of $70 million to $80 million within three years, and the acquisition would boost return on equity in the first year. “We believe the synergies and alignment will deliver sustainable, profitable growth,” Mr Frazis said.

BoQ, which is briefing investors about the deal on Monday morning, also upgraded its profit guidance. The lender said it was on track to boost cash profits by 8 to 10 per cent in the first half, as it had grown housing loan market share and was experiencing wider profit margins.

More to come

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