Bank of Queensland to acquire 100% of ME Bank for $1.325 bn

The ME Bank base in Melbourne will remain and the ME brand will be maintained and grown.

BRISBANE: Bank of Queensland Limited (BOQ) has entered into an agreement to acquire 100% of Members Equity Bank Limited (ME Bank) for cash consideration of $1.325 billion, a news release said.

The acquisition will be funded by an underwritten capital raising of $1.35 billion.

Chairman Patrick Allaway stated, “Today’s announcement is another major step in our 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.

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 Mr George Frazis said, “This is a defining acquisition in our ongoing transformation of BOQ, benefitting our shareholders, customers, and people. Critically, ME Bank delivers material scale, broadly doubles our Retail bank, and provides geographic diversification. The ME Bank brand is also a great fit with the BOQ and Virgin Money brands, creating customer-centric alternatives in Australia.

“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,” Mr Frazis said.

 “Combined, the Group will have pro forma total assets over $88bn, with total deposits of more than $56bn. We believe the synergies and alignment will deliver sustainable, profitable growth,” Mr Frazis said.

The acquisition price represents an implied acquisition multiple of 1.05xME’s FY20 reported book value3and 11.9xMEBank’s FY20 cash underlying earnings.

Pre-tax annualised synergy benefits of approximately $70-$80 million are expected by the end of year 3, with approximately 75% of synergies to be delivered on an annualised basis by the end of the second year post-completion.

Pre-tax integration costs are estimated to be $130-$140m, with the majority to be incurred in the first two years. The acquisition is expected to be low double-digit to mid-teens cash EPS accretive including full run-rate synergies in the first year (FY22).

The organisations are highly complementary and share a similar customer-centric culture as well as purpose and values that are focused on helping all our customers get ahead and create prosperity.

Mr Frazis said, “The addition of ME Bank is expected to broadly double the size of the Retail Bank, increase Retail earnings contribution from approximately 36%to greater than 50%6and balance out our East Coast presence. The increase in customer numbers means BOQ Group can now provide a genuine banking alternative to approximately 1.45 million people.

“BOQ’s digital transformation is well underway, and the acquisition of ME Bank is expected to accelerate the pathway to a scaled common cloud based digital Retail bank technology platform. We believe that the benefits of a single platform are significant, but are largely underpinned by the ability to leverage global capability with evergreen upgrades via cloud software.

“BOQ, Virgin Money and ME are all customer-centric brands, evidenced by high NPS, a loyal customer base and aligned purpose and values, which we believe makes ME the ideal addition to BOQ Group’s stable of brands. We believe the BOQ Group is the perfect home for both ME’s customers and employees, and we look forward to welcoming them to the Group,” Mr Frazis said.

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