WESTPAC Banking has approached rival the St George Bank with a A$15 billion (US$14 billion) takeover offer, Westpac said yesterday, in what could be the biggest shake-up of Australia's bank sector in years.
The deal would create Australia's largest financial services firm in terms of market capitalization, valued at almost A$64 billion based on Friday's closing prices.
The combined group would have some 10 million customers, a 25 percent share of Australia's home loan market and be the nation's biggest wealth platform provider with funds under administration of A$108 billion, Westpac said.
The planned takeover could top a bid by BG Group for Origin Energy as the largest proposed deal in Australia this year excluding debt.
"St George and Westpac are two highly successful banks, but we believe they would be stronger together in a way that allows both to harness the strength of each, while maintaining their unique identities and market positions," Westpac Chairman Ted Evans said.
Westpac said its proposal was for an all-equity deal. At the close of trading on Friday, St George's market capitalization was A$14.95 billion.
St George said it received Westpac's approach on May 9, and expects to make a further announcement before the start of trading today.
Trading in Westpac and St George shares was halted just before the announcement.
Westpac's new chief executive, Gail Kelly, a former chief executive of St George, said a combined group would compete more effectively with rivals the Commonwealth Bank of Australia, the Australia and New Zealand Banking Group and the National Australia Bank.
Westpac is currently Australia's third largest bank by market capitalization, and with the Commonwealth, ANZ and National Australia, forms the country's "big four" banks.
Stocks in other banks surged as investors speculated that St George takeover could prompt other big banks to seek acquisitions.
NAB shares rose almost 4 percent in the first two hours of trade. Commonwealth and ANZ shares rose about 2 percent. Smaller banks also rose, with Bank of Queensland up 3 percent.
The takeover requires approval of a range of regulatory authorities and Treasurer Wayne Swan. Regulators did not immediately comment on the Westpac bid.