Early signs of corporate activity in financial services springing to life

Bank of Queensland’s restructure a possible precursor to its merger with Bendigo Bank. Picture: Dan Peled

After a quiet period for deals, there’s early signs that corporate activity in the financial services sector is coming back to life.

Bank of Queensland’s restructure is being seen as laying the ground work for a future merger with Bendigo Bank.

It has opted to slash 400 jobs, focus on business bank growth while building up digital capabilities for consumer banking and convert 114 of its owner-managed branch network to corporate branches, with full ownership of the branch network to the group,

The changes will take months to implement but simplifies the business and has been applauded by market experts.

It makes a deal with Bendigo Bank far more simple, and regional banks need to consolidate to compete with the big four lenders.

The challenge is that Bendigo Bank’s outgoing CEO, Marnie Baker, was keener on the move than incoming boss Richard Fennell.

It means that any merger would have to be board-led or come after his departure from the top job.

Bendigo Bank weighed an acquisition of Suncorp Bank before the latter was bought by ANZ, and has held talks with Judo Bank about a tie-up.

Other deals in the sector likely in the months ahead include further consolidation among asset managers and vehicle leasing companies.

Perpetual Asset Management will be closely watched by suitors after its Corporate Trust unit is sold, with a view that consolidation is needed to sustain earnings and a lot of talks about M&A in the industry.

As it stands, the Perpetual business appears undervalued, but it will need to be clearly assessed once trading as a stand-alone company.

Among candidates to buy Perpetual Asset Management are Regal Funds Management, which has bid for Perpetual Asset Management in the past; Magellan Financial Group; and Platinum Asset Management.

Meanwhile, MST analysts believe a scrip tie-up between FleetPartners and Smartgroup makes sense at a 10-15 per cent premium with synergies of $30m.

“This merger of equals would deliver earnings per share accretion of about 20 per cent,” they said in research.

Cracking coal deal

Whitehaven Coal’s $US1.08bn it received from selling 30 per cent of the Blackwater coal mine it bought from BHP has been seen as a cracking result and bodes well for Anglo American’s upcoming coal portfolio sale.

It has entered into two separate binding agreements with Nippon Steel and JFE Steel to buy 20 per cent and 10 per cent respectively for the combined amount, more than its $1.3bn of net debt at June.

The underbidder was India’s JSW, but was far away on price.

DataRoom flagged the looming selldown to the two groups on July 30.

It purchased the Daunia and Blackwater coking coal mines from BHP for $6.4bn, completing the deal in April.

Next on the company’s to do list is to head to court on September 2 against Nathan Tinkler and Farallon and Argyle Street Management who are fighting for the right to trade 34 million restricted shares, plus compensation for dividends and about $150m.

Whitehaven is defending the claim.