Bank of Queensland intends to fund the acquisition through an underwritten capital raising of A$1.35bn


BOQ to acquire ME Bank. (Credit: Tumisu from Pixabay.)

Bank of Queensland (BOQ) has agreed to acquire Members Equity Bank (ME Bank) for a total cash consideration of A$1.325bn ($1.04bn).

Based in Melbourne, Victoria, ME Bank has offices in Sydney, Brisbane, Adelaide, Perth, Hobart, Canberra and Darwin.

The acquisition price represents an implied acquisition multiple of 1.05 times the ME bank’s reported book value and 11.9 times its cash underlying earnings for FY20.

The Australian retail bank BOQ intends to fund the transaction through an underwritten capital raising of A$1.35bn.

BOQ chairman Patrick Allaway said: “Today’s announcement is another major step in our strategy to be the leading customer-centric alternative to the big banks.

“With the addition of the ME Bank business, BOQ now has material scale and a compelling growth platform to support this ambition.

“The combination of our highly complementary businesses brings together two organisations with a shared purpose and values generating greater value for customers, employees and shareholders.

“This is underpinned by the successful revitalisation of the bank since early 2020 with the team’s strong execution capabilities being reflected in our earnings progress to the half.”

Once the transaction is closed, the combined company is expected have pro forma total assets valuing more than A$88bn, and total deposits of more than A$56bn.

The company is expected to get pre-tax annualised synergy benefits of around A$70 to A$80m, in the first three years, with nearly 75% of synergies delivered by the end of the second year.

Also, the acquisition is expected to incur estimated pre-tax integration costs of A$130m to A$140m, with the majority to be incurred in the first two years.

The transaction before the end of BOQ’s financial year 2021, subject to regulatory approval pursuant to the Financial Sector (Shareholdings) Act 1998.

BOQ managing director and CEO George Frazis said: “This is a defining acquisition in our ongoing transformation of BOQ, benefitting our shareholders, customers, and people. Critically, ME Bank delivers material scale, broadly doubles our Retail bank, and provides geographic diversification.

“The ME Bank brand is also a great fit with the BOQ and Virgin Money brands, creating customer-centric alternatives in Australia.

“We are on track with our strategic transformation and we anticipate that the combination of the two businesses will enable us to accelerate our digital strategy towards a cloud-based common digital Retail bank technology platform.”