Bank of Queensland (BOQ) has signed an all-cash deal to acquire Members Equity Bank (ME) for about $1.3 billion (US$1.03 billion).
Announced on Feb. 22, the deal will see the BOQ emerge as a nation’s sixth-largest bank, giving it the scale it needs to challenge the big four—NAB, CommBank, ANZ, and Westpac.
The acquisition was fully funded through underwritten equity raising and is expected to be complete by the end of the 2021 financial year.
BOQ chairman Patrick Allaway described the deal as “transformational” and “strategically aligned,” saying it was a major step in the bank’s plan to be “the leading customer-centric alternative” to the big players.
ME is an industry super fund-owned mortgage lender launched in the 1990s, with a current loan book value sitting around $25 billion. As a result, BOQ will double its retail bank size, bringing its retail and business ratio close to a 50-50 split. It will also lift its ranking among the national financial institutions to the sixth position, just below Macquarie Bank.
BOQ Managing Director and CEO George Frazis said the deal is set to deliver “sustainable and profitable growth” to the merged entity.
“Combined, the group, will have pro forma total assets over $88 billion, with total deposits of more than $56 billion,” he said.
The bank also expects the integration to generate benefits between $70 million to $80 million within three years and boost return on equity in the first year.
The two banks confirmed business remains as usual for customers and employees. Under the deal, the ME brand, employee, operations, and Melbourne-based presence will be retained. The merger will not affect or change its existing customers’ accounts, nor their relationship with ME bank.
ACCC Welcomes the Merger
Rod Sims, chair of ACCC, has welcomed the merger and sees it as a potential way to disrupt the status quo of the “big four” Australian banks.Sims also believes that the acquisition means both institutions now stand a better chance of penetrating the big four banks’ market dominance.
“If this can help them with a wider product offering, a wider geographic offering, a bit more economies of scale, if this could help them challenge the big four, that’s helping,” he said.