ACCC unearths conflicting evidence in ANZ-Suncorp Bank takeover bid about potential merger with Bendigo Bank

New ACCC documents reveal conflicting evidence about a potential merger between Suncorp’s lending unit and Bendigo Bank.

Suncorp submissions to the competition regulator, made under oath, are at odds with evidence it considered Bendigo and Adelaide Bank a viable bidder for its banking business, new documents show.

The Australian Competition & Consumer Commission on Monday released a 249-page brief detailing the reasoning behind its move on Friday to block ANZ’s $4.9bn Suncorp bank takeover.  

The heavily redacted document shows that despite Suncorp and ANZ both telling the regulator that if their deal was not allowed, a merger with Bendigo was not viable, there was evidence of “substantial analysis undertaken by Suncorp” suggesting that the deal is a realistic proposition.

It said Suncorp’s internal documents showed a merger with Bendigo had been “previously assessed as the second best alternative to the proposed acquisition”.

“The ACCC considers that there was substantial analysis undertaken by Suncorp Group, which included various external analyses commissioned by Suncorp Group, considering a regional merger as an alternative option,” the document says.

“In much of that analyses, BEN are positioned either as the relevant benchmark or preferred counterparty against which to assess a regional merger.”

Suncorp and ANZ told the regulator that if authorisation was denied the most likely outcome would be the status quo – Suncorp continuing to run its combined banking and insurance businesses – because an acquisition by ­Bendigo was not “commercially realistic”.

The chronology of interactions between the parties has been redacted for confidentiality reasons, but the document says that “over the course of several years” Suncorp undertook “various strategic reviews”, receiving external advice on ways to shed a “conglomerate discount” from its market valuation. It says that Suncorp “invested significant time and resources into considering the option of a regional merger, with specific reference” to Bendigo Bank. In its own submissions Bendigo said that there was a “reasonable prospect” that it “would make a binding offer to acquire Suncorp Bank, and that offer would be accepted by Suncorp Group,” according to the document.

A potential merger with Bendigo was still being considered ‘in detail’ last year by Suncorp, shortly before the deal with ANZ was announced in July 2022.

The ACCC says that external advisers for Suncorp had “considered the second-best option to the ANZ offer to be a merger with a regional bank, with BEN as the preferred partner”, adding that a number of strategic reviews and analyses “repeatedly concluded that a regional bank merger with Bendigo would be value accretive.”

A potential merger with Bendigo was still being considered “in detail” last year, shortly before the deal with ANZ was announced in July 2022.

In taking a view about “conflicting submissions and evidence about the commercial likelihood of a merger between Suncorp Bank and BEN in the future without the proposed acquisition, as well as evidence in the ANZ-Suncorp takeover battle of the competitiveness of a combined entity,” the regulator assessed “the evidence cogency and reliability” and “the incentives each has to pursue a transaction” if the ANZ-Suncorp deal did not go ahead, it said.

“The ACCC’s view is that there remain strong incentives for Suncorp Group to divest Suncorp Bank. The ACCC considers that although Suncorp Group would need to carry out further assessment of any potential transaction, it still has incentives to merge Suncorp Bank with BEN if an offer came before it.”

But the full account of the deliberations behind the ACCC’s decision to block the deal was mixed on the competitive outcomes.

The ACCC had warned it had concerns that allowed ANZ to buy Suncorp Bank would encourage a “live and let live” approach where the big four banks did not compete with each other.

However, the regulator’s report also finds “it is highly uncertain whether this will funda­mentally change ANZ’s future competitive position; or whether in the absence of the proposed acquisition ANZ’s ability to be an effective competitor will merely be ‘marginally less’ than if the proposed acquisition proceeds”.

“The most significant public detriments from the proposed acquisition are the likely effects on competition in relation to home loans, retail deposits, SME banking and agribusiness banking,” the report notes.

“The ACCC considers that harm to competition, whether or not it amounts to a substantial lessening of competition, constitutes detriment to the public.” ANZ argued buying Suncorp Bank would hand the Melbourne-based lender almost 1.2 million customers, largely spread across Queensland and northern NSW, that it could use to offset its ballooning cost base.

The ACCC noted ANZ chief executive Shayne Elliot told the regulator its investment spend had jumped from $430m in 2015 to $1.01bn in 2022.

“The ACCC accepts that the proposed acquisition will likely give ANZ an ability to spread its fixed costs over a larger customer base through increased scale, and this may allow it to achieve some scale benefits,” the report noted.

“However, the extent to which these benefits will increase ANZ’s competitiveness is uncertain, particularly as ANZ has stated that it would continue to invest in its digital transformation without the proposed acquisition.”

The ACCC noted it had reviewed more than 50 submissions, 27 witness statements and 12 expert reports. The report noted ANZ had claimed an increase in customers switching banks demonstrated the competitiveness of home lending. However, the ACCC said it “does not consider that the refinancing metric used in ANZ analysis clearly evidences an increase in customer switching in home loans”.

ANZ and Suncorp have vowed to appeal the ACCC’s decision, taking the case to the Australian Competition Tribunal.