3rd UPDATE: ANZ To Buy ING JV In Australia, New Zealand For EUR1.1 Billion
September 25 2009 - 12:58AM
Dow Jones News
Australia and New Zealand Banking Group Ltd. (ANZBY) said Friday
it will buy ING Groep NV's (ING) 51% stake in their Australia and
New Zealand wealth management and life insurance joint venture for
EUR1.1 billion.
The cash deal makes good on ANZ's ambitions to boost its
exposure to the fast growing wealth management sector, where it has
been underweight compared to many of its peers.
It will also free up capital for ING, which is selling assets as
part of its "Back to Basics" program as it looks to repay a
government lifeline.
Australia's biggest banks have been capitalizing on the weakened
positions of some of their global peers to build market share. ANZ
recently struck a deal to buy some of RBS' Asian banking operations
for US$550 million.
"ANZ has been able to take advantage of the global financial
crisis and ANZ's strong balance sheet to advance our strategy," ANZ
Chief Executive Mike Smith said.
ING expects a profit of around EUR300 million on the sale, which
will improve its debt to equity ratio. It will also free up an
estimated EUR900 million of capital for the firm, it said in a
statement.
"The sale of our insurance and wealth management operations in
Australia and New Zealand is further proof of our determination to
simplify the organization by focusing on fewer, strong franchises
that form a coherent group," ING Chief Executive Jan Hommen
said.
The group is targeting EUR6 billion-EUR8 billion in asset sales
to help pay down a EUR10 billion lifeline it received from the
Dutch government last October to underpin its core capital.
It has put its Asian and Swiss private banking assets up for
sale, either to be bought together or separately. Offers for both
are estimated at around US$2 billion and ING is likely to decide on
the winning bidders next month, a person familiar with the
situation said Thursday.
ANZ's Smith said he wasn't interested in the ING private banking
business in Asia, but expects more opportunities to emerge around
the region as the fallout from the global financial crisis forces
more banks to shift their focus back to their home markets.
Australian lenders have avoided the worst of the global
financial crisis, and Melbourne-based ANZ Bank had been sitting on
around A$4 billion in cash, following a recent capital raising, for
acquisitions.
ANZ has differentiated itself from its domestic peers by
targeting growth in Asia, but Smith said Friday's deal was
consistent with the group's strategy to become a "super-regional"
player.
"ANZ's super regional objective is not just an Asian strategy -
it's a regional strategy founded on strong positions in our
Australian, New Zealand and Asia Pacific markets," he said.
Still, ANZ, which will be able to use the ING name for the
business for 12 months, could roll out the wealth management
platform into other countries around Asia, Smith said.
"The value proposition is also compelling with an attractive
purchase price combined with significant revenue opportunities and
selected cost synergies," he said.
ANZ said it expects the deal, which is expected to close by the
end of the year, to boost its earnings per share in the 2010
financial year, even before taking into account "significant"
synergies.
After the ING transaction, ANZ's Tier 1 capital will fall to
9.5% from 10.2% at the end of June.
ANZ shares rose on the back of the deal, with some investors
relieved that the bank had not pursued a pricey acquisition in
Asia.
At 0525 GMT, ANZ shares were up 2.4% at A$24.06, while the
benchamrk S&P/ASX 200 index was up 0.4%.
Johan Vanderlugt, an analyst at Daiwa, said: "We applaud the
deal for its strategic fit and the return on equity upside coming
from the very profitable and stable Australian wealth management
business."
ANZ said it expects ROE in the mid-teens for its wealth
management business. Analysts said the price terms seemed
attractive for ANZ.
Australia's other major banks have also been building out their
financial services business as international groups pull back their
operations.
National Australia Bank Ltd. in June agreed to buy some of Aviva
PLC's Australian business for A$825 million and in August said it
would take a majority stake in Goldman Sachs JBWere's private
wealth management business in Australia and New Zealand for A$99
million.
Other notable deals include Commonwealth Bank of Australia's
acquisition of BankWest from HBOS for what was considered a
bargain-basement price.
ANZ's Smith said that he'd approached ING about buying out the
joint venture, in which ANZ currently holds 49%, for some time.
ING's regional Chief Executive for Investment Management Alan
Harden told Dow Jones Newswires that the two had started talks "a
few months ago."
ING will retain its ING Direct, ING Investment Management, ING
Wholesale Banking and ING Real Estate operations in Australia.
The deal remains subject to regulatory approval.
-By Lyndal McFarland, Dow Jones Newswires; 61-3-9292-2093;
lyndal.mcfarland@dowjones.com
(Robin Van Daalen in Amsterdam and Ellen Sheng in Hong Kong
contributed to this article)