Bendigo and Adelaide Bank is believed to be circling AMP’s banking operations amid mounting expectations of a break-up of the troubled financial company.
This week, it emerged that AMP had a buyer for the bank, and DataRoom understands Bendigo has an interest in acquiring the operation.
Bendigo and Adelaide Bank’s market value is $3.38bn, and while the valuation of the AMP bank is unclear, it is thought to be at least $1bn.
The understanding is that the price is within the grasp of Bendigo and Adelaide Bank, but it would need to carry out a major equity raising.
Bendigo and Adelaide Bank, which has declined to comment on its interest in AMP, typically calls on the services of adviser Grant Samuel, while AMP has hired Goldman Sachs and Credit Suisse for a strategic review of its overall operations that could result in a sale of all or part of the business.
Most observers expect consolidation among regional banks.
Last year, there was talk in the market that Bendigo was exploring a merger with Bank of Queensland, creating a stronger competitive edge in the mortgage market.
There was also talk that Suncorp was sizing up the bank in 2018, offering to buy Bendigo at a 21 per cent premium to its market price at a time it was trading at a low earnings multiple, but the offer was rebuffed.
Bendigo has a community bank structure, which creates an additional challenge.
For the 2020 financial year, it posted a $192.8m net profit, down 48.8 per cent from the previous corresponding period.
For the six months to June, AMP Bank posted a $50m profit, down 29.6 per cent on the previous corresponding period.
In an AMP break-up, most consider the AMP Capital real estate and infrastructure funds management business will be most popular with buyers, but the board would be unlikely to part with only the best assets.
Meanwhile, further speculation emerged that a major global player in private assets was interested in AMP Capital, but may buy all of AMP and sell off non-core parts.
This could see the suitor sell the bank to Bendigo and Adelaide Bank, but a buyer would still need to be found for the less attractive wealth management operations.
Some believe the logical candidates for a major deal — worth over $4bn are groups such as Canadian private equity firm Brookfield or Blackstone, based in New York.
The sweeping review of AMP’s operations, which could lead to a carve-up of the business, comes after a period of controversy for AMP that includes the decision to appoint Boe Pahari as head of AMP Capital despite a $500,000 fine for sexual harassment.
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