Bank of Queensland’s $1.3b takeover of ME Bank approved by Treasurer Josh Frydenberg

A high-profile but problem-plagued acquisition has finally got over the line but it comes in the wake of criminal charges and a capital raising effort that left thousands of investors disenfranchised.

One of the most problem-plagued acquisitions in recent memory finally got over the line Monday.

Bank of Queensland announced that the $1.32bn takeover of ME Bank cleared its only regulatory hurdle after Treasurer Josh Frydenberg gave his blessing for the union.

But the tie-up, which was announced in February and takes effect at the start of next month, comes after thousands of BOQ investors were disenfranchised from taking part in the capital raising.

It also follows embarrassing revelations that the corporate cop has just hit ME Bank with 62 criminal charges for making false or misleading representations to clients and breaching the National Credit Code in the two-year period to late 2018.

Bank of Queensland CEO George Frazis

That didn’t stop BOQ chairman Patrick Allaway from gushing that the merger was “a defining moment in the transformation’’ of the company and had created “a compelling alternative to the big banks’’.

BOQ boss George Frazis was equally effusive.

“The addition of ME Bank to the BOQ group will further strengthen our multibrand strategy, deliver material scale, broadly double the size of our retail bank and provide us with geographic diversification,’’ he said.

Conspicuously absent from their comments was any mention of what investor advocate Stephen Mayne described in March as “the biggest distribution stuff-up ever in Australian capital raisings’’.

Thousands of shafted “mum and dad” BOQ investors in mainly rural and remote areas across Queensland and WA missed out on an opportunity to take up their entitlement to discounted shares because of late mail delivery.

Some even got the documents after the offer closed, meaning they had no opportunity to make an easy paper profit. Instead, investment bank clients picked up the slack, pocketing an estimated $50m in value that could have gone to as many as 70,000 BOQ shareholders.

BOQ, inundated with at least 450 complaints, maintained that it did nothing wrong and neither ASIC nor the ASX intervened.

Investor advocate Stephen Mayne

ASIC, however, launched criminal proceedings in Federal Court against ME Bank in May for allegedly failing to properly notify clients about changes to mortgage interest rates and repayments between 2016 and 2018.

ME Bank, owned by 26 industry super funds, is defending the case and has previously noted that it self-reported the problem to ASIC in late 2018.

The lender said about $105,000 was remediated to customers by mid-2019 and the matter has been resolved.

Notably, a BOQ spin doctor acknowledged his bank knew about the alleged contraventions of financial services law before announcing the acquisition.

But that’s not all.

BOQ was also aware that ME Bank had been criticised by the industry watchdog for systemic breaches of the banking code of practice stemming from a home loan redraw error during last year’s pandemic lockdown.

Without warning in April 2020, ME Bank changed the rules of its redraw facilities but failed to notify borrowers.

The lender trimmed client redraw limits and transferred money into their home loan accounts, which resulted in some people unable to access their own funds.

ME Bank boss Jamie McPhee later fell on his sword but maintained his departure was unrelated to the redraw drama.