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“Extensive due diligence” on the MyState/Auswide Bank merger has convinced the bank boards that it would be “in the best interests” of shareholders to vote in favour of the scheme.
The boards of Tasmanian-based lender MyState Limited (MyState) and Bundaberg-headquartered lender Auswide Bank (Auswide) have told their shareholders that the merged group would be “better positioned to pursue further growth”.
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As such, the Auswide Bank board has urged Auswide shareholders to vote in favour of the merger on 2 December, which would see Auswide shareholders receive 1.11 new MyState shares for every share they hold in Auswide. This implies a 65.9 per cent pro forma ownership of the combined group for existing MyState shareholders.
In the scheme booklet, which was registered with the financial services regulator on Tuesday (22 October), it was revealed that Auswide directors have unanimously recommended that Auswide shareholders vote in favour of the scheme (in the absence of a superior proposal being offered).
The conclusion was made by the board after directors conducted an assessment of the merits of the scheme and found that there would be “potential cost synergies” realised by a merged group – expected to be between $20 million and $25 million per annum – and benefits from the increased market capitalisation (estimated to be around $635 million) relative to Auswide being a stand-alone group (such as increased future dividends).
“The Auswide Board believes the scheme represents an opportunity to build scale and position the Merged Group to deliver better outcomes for customers, staff and shareholders,” the Auswide chair Sandra Birkensleigh said in a letter to Auswide shareholders included in the scheme booklet.
“By merging two high-quality, complementary banks with aligned operating models, the Auswide Board believes that there is the potential to unlock efficiencies, synergies and growth opportunity which may in turn deliver a positive return to shareholders.”
Similarly, Vaughn Richtor, the chair of MyState Bank, told shareholders at the bank’s annual general meeting on Wednesday (23 October) that the merger would bring “greater revenue, portfolio diversification and scale for cost efficiency and customer reach”.
“Based on extensive due diligence, it is the judgement of the MyState Board the transaction is in the best interests of MyState Limited shareholders,” he said.
“It is also important to understand that there are strategic benefits from a merged group that are not directly quantifiable, such as a larger portfolio of home loans across geographies and risk profiles; greater revenue diversification, benefits of scale such as higher cost efficiency and negotiating power with suppliers and greater access to governance and management talent.”
Richtor said that the proposed merger would deliver 50 per cent growth “overnight” and would be strongly aligned with MyState’s longer-term growth strategy.
“The proposed merger will bring together two businesses with highly aligned business models, strategies, and values,” he said, noting their “strong, loyal customer bases, with high-quality loan books with low arrears and solid deposit gathering capabilities”.
“Both businesses share customer-centric cultures and national distribution networks of mobile lenders and brokers while maintaining a physical presence in their home states of Queensland and Tasmania. The proposed merger will deliver greater revenue, portfolio diversification and scale for cost efficiency and customer reach.”
Looking to the future, Richtor said that the proposed merger would further diversify both the mutual lenders’ loan balances geographically and support continued growth in deposits.
“The immediate increase in scale will enable the Merged Group to benefit from the ability to spread operational and future investment costs across a larger customer base and loan portfolio,” the MyState chair told AGM attendees.
“The Merged Group will also reaffirm its position in the ASX 300 index, which will provide greater access to capital markets and broaden investor interest in MyState stock.”
Brett Morgan, the managing director and CEO of MyState Ltd, also told the AGM that “combining two complementary businesses with a broad reach across the Eastern seaboard, will enable delivery of substantial value for our people, customers, communities and shareholders”.
If Auswide shareholders vote in favour of the scheme on 2 December, a court hearing will be held on 6 December to approve the scheme and the merger will be implemented on 18 December.
As first announced in August, the merger would create a group with a combined loan book of $12.5 billion, customer deposits of $9.6 billion, and total revenue of $265 million (for the financial year ending June 2024).
MyState will continue as the parent company of the merged group, with Auswide becoming a wholly-owned indirect subsidiary.
MyState CEO and managing director will become CEO & MD of the merged entity, with Auswide nominating three directors to join the MyState board (which will have four MyState members).
[Related: Brokers will ‘absolutely be the predominant channel’ if MyState and Auswide merge: MyState CEO]
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