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Adelaide Bank and Bendigo Bank announce intention to merge

9 August 2007 |Media centre

The Boards of Adelaide Bank and Bendigo Bank have announced their intention to merge and create a unique customer and partner focused financial services organisation.

The merger combines two successful companies that both announced record annual profits this morning.

The merger will be implemented by a Scheme of Arrangement of Adelaide Bank which will require approval by Adelaide Bank Shareholders at a meeting expected to be held in November 2007. Adelaide Bank shareholders will receive 1.075 Bendigo Bank shares per Adelaide Bank share.

The Directors of Bendigo Bank and Adelaide Bank unanimously support the merger1.

Following the merger, a proposal to change the name of the merged company to “Bendigo and Adelaide Bank Limited” will be submitted to shareholders of the merged company. The change of name will not impact on branding.

The Chairman of Adelaide Bank, Dr Adele Lloyd, said the two companies had each developed innovative, distinctive and complementary strategies and were leaders in their fields. Adelaide Bank excels in partnering with a range of distribution partners as a specialist wholesale finance provider, while Bendigo Bank is Australia’s pre-eminent service-focused retail bank, renowned for partnering with communities.

“Both banks are committed to high levels of stakeholder engagement, understanding that it is the success and prosperity of their partners and customers which drive their own success,” Dr Lloyd said.

“Both businesses are recognised for their leadership positions within the markets they target. Our fundamental strengths in assisting customers and partners to achieve their aims will remain central for the merged company.”

Bendigo Bank Chairman, Robert Johanson, said the strengths of the two businesses could be seen in their profits for the 2007 financial year, which were also released today. Each has reported record profits from strongly growing businesses.

“The merger will bring together specialist skills in wholesale and retail banking that have been separately developed. The merged group will retain and continue to grow both brands,” Mr Johanson said.

“This merger creates a business with complementary products and services that can be delivered more cost effectively to customers and partners. We are committed to ensuring the merged group continues the excellent track-record of both organisations in creating sustainable value for shareholders,” he said.

The merger brings Adelaide Bank’s core competencies in wholesale mortgages, margin lending and portfolio funding together with Bendigo Bank’s unique community focused retail banking business. This merger provides real and tangible benefits for all stakeholders.

Customers will have access to more products, more branches and more ATM’s through more than 380 company and community-owned branches across Australia. Both the Adelaide Bank and Bendigo Bank brands will be retained and grown. The Community Bank® model will continue to grow and prosper under the merged company, and the group will have greater capacity to invest further in the South Australian branch network.
Partners of both banks, including wholesale distributors of mortgages and other financial services products, will see a continued commitment to the partnership model. These partners will have access to a greater variety of products, backed by the greater scale and processing capability of the merged group.
Shareholders will own a unique company with an enhanced financial profile, and with a market capitalisation of about $4 billion2, sits well within the S&P/ASX100. It is expected the merger will deliver significant value and cash EPS accretion3 for both sets of shareholders in the first full financial year. It is anticipated the merger will ultimately provide pre-tax cost synergies of $60m to $65m. Cost synergies will be in areas such as reducing functional overlap, IT savings and the consolidation of corporate costs. In addition, there is also the potential for substantial revenue synergies including through an increased product offering of the merged group to both customer sets.
Staff will be provided with greater career opportunities through a larger and more diversified company. Head office functions will be split between existing sites. The combined group will have about 4,000 staff, across every state and territory of Australia.
With increased financial strength, scale efficiency and funding flexibility, the merged group is better positioned to pursue expansion opportunities and invest in growth and continued innovation.

The Merged Group

The Merged Group will be a stronger more diversified business with substantial scale.

It will have loans under management of more than $43 billion and an enlarged presence in the fast growing wealth management sector, with approximately $7 billion of funds under management and advice
It will have a market capitalisation of about $4 billion4 placing it well within the S&P/ASX100 index
It will have about 80,000 predominately retail shareholders
It will have an expanded national footprint of more than 380 branches covering all States and Territories. It is planned to open a further 25 branches in 2007/08
The respective businesses currently serve more than 1.3 million customers
The key businesses of the Merged Group will include Retail Banking (including Community Bank®), Wealth Management (including Leveraged Equities, Adelaide Managed Funds and Sandhurst Trustees), Wholesale Mortgages, and Business Partners (including Portfolio Funding, Adelaide Bank’s Specialised Lending and Bendigo Bank’s SME offerings, including Oxford Funding). It will retain Bendigo Bank’s current joint venture businesses Elders Rural Bank, Tasmanian Banking Services, Community Sector Banking and Homesafe.

Board, Governance and Management

The Boards of both Bendigo Bank and Adelaide Bank will each be reduced by two directors when the companies are merged. This will result in a board of twelve, including two executive directors.

Robert Johanson, Chairman of Bendigo Bank, will be the Chairman of the merged group. Kevin G Osborn, Non-Executive Director of Adelaide Bank will become the Deputy Chairman.

Mr Rob Hunt, Group Managing Director of Bendigo Bank, will continue to lead the organisation as Group Managing Director of the merged group until 1 July 2009. In addition to leading the organisation, Mr Hunt will concentrate on the continued performance improvement and the effective integration of the two already successful businesses. His other primary focus will be on securing the ongoing innovation demonstrated by both organisations, and a methodology to ensure the level of customer and partner advocacy required to secure the significant point of difference developed by both organisations to date.

Adelaide Bank’s Managing Director, Jamie McPhee, will be appointed to the Board of the merged group as Executive Director and be responsible for the Group’s Wholesale Banking services. With Mr Hunt’s retirement in July 2009, this will place Mr McPhee in an excellent position to succeed Mr Hunt.

Bendigo Bank’s Chief Operating Officer, Mike Hirst, will be responsible for the Retail Banking businesses. Both will concentrate on the continued development and expansion of the merged group and will ensure continuation of the customer commitment demonstrated through the customer-selected distribution channels.

Details of the Merger

Adelaide Bank shareholders will receive 1.075 Bendigo Bank shares per Adelaide Bank share. The merger will be implemented by a Scheme of Arrangement of Adelaide Bank and is subject to the approval by Adelaide Bank shareholders at a vote anticipated to be held in November 2007 and Court approval. It is expected that scrip-for-scrip capital gains tax (CGT) rollover relief will be available to Adelaide Bank shareholders.

The merger is also subject to regulatory approvals and the opinion of an independent expert that it is in the best interests of Adelaide Bank shareholders.

The proposal for dealing with the Adelaide Bank Reset Preference Shares is to be determined. The Step-Up Preference Shares will be subject to a separate Scheme, the terms of which are to be determined.

A proposal to change its name to “Bendigo and Adelaide Bank Limited” will be submitted to the shareholders of the merged company when the merger is complete.

Each Adelaide Bank Director intends to vote in favour of the merger proposal, in the absence of a superior proposal and subject to the opinion of the independent expert.

Further details of the key terms of the Merger Implementation Agreement are set out in an attachment to this announcement.

Timing and Logistics

It is currently expected that scheme documentation will be sent to Adelaide Bank shareholders in October 2007, with a Scheme Meeting and final court hearing in November 2007.

Shareholder Information

Further information on the merger proposal will be lodged with the ASX and published on the Adelaide Bank and Bendigo Bank websites.

Further information for Adelaide Bank shareholders is available on the following number: 1800 211 826 (free call) or +612 8986 9354 (overseas callers).

Further information for Bendigo Bank shareholders is available on the following number: 1300 361 911.

Adelaide Bank’s financial advisers are ABN AMRO and legal advisers are Johnson Winter & Slattery.

Bendigo Bank’s financial advisers are Grant Samuel and Goldman Sachs JBWere and legal advisers are Allens Arthur Robinson.

For further information contact:

Will Rayner
Head of Investor Relations
(08) 8220 7764
0437 794 366

Owen Davies
General Manager Corporate Affairs
(03) 5485 7108
0418 521 817

1 The recommendation of the Directors of Adelaide Bank is subject to the absence of a superior proposal and the opinion of an Independent Expert that the merger is in the best interests of Adelaide Bank shareholders
2 Based on market capitalisations as at 8 August 2007
3 Excluding one-off and merger integration costs
4 Based on market capitalisations as at 8 August 2007

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