Westpac Banking Corporation Ltd will acquire Lloyds Banking Group’s Australian asset finance business, CFAL, and its corporate loan portfolio, BOSI, for $1.45 billion.
In a statement to the stock exchange today Westpac said the acquisition would deliver benefits to shareholders and was a good strategic fit with the existing businesses of St.George and Westpac Institutional Bank (WIB).
The St George division includes BankSA.
Westpac chief executive Gail Kelly said the deal will boost earnings per share.
“This is a value creating, straightforward transaction that makes both commercial and strategic sense,” Kelly said.
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“These are strongly performing businesses that we know well and that will expand our reach and capability in target segments.
“Importantly the transaction meets our strict acquisition criteria and shareholders will see a benefit to earnings per share in FY14.
“Our strong capital position has allowed us to expand our business without having to raise additional equity.”
The Westpac statement said the transaction is expected to deliver approximately $100 million in additional cash earnings by financial year 2015.
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It said other benefits from the transaction include expanding the group’s capability and reach within equipment finance; building scale and geographic diversity within the group’s motor vehicle finance business; and deepening customer relationships with the opportunity to cross-sell other Westpac Group products.
CFAL’s motor vehicle finance and equipment finance business has total receivables of $6.8 billion across 213,000 consumer and commercial customers.
The corporate lending portfolio totals $2.7 billion of commitments.
“It is a high quality investment grade portfolio with exposure across Australian corporates, financial institutions and infrastructure and energy projects,” the statement said.
“Westpac already has relationships with 80 per cent of these customers.”
The purchase price of $1.45 billion includes approximately $1.19 billion in net tangible assets and approximately $260 million in goodwill.
The acquisition will be funded from internal resources.
The deal is not subject to regulatory approvals and is expected to be completed on 31 December, 2013.
Westpac said it has notified the Australian Competition and Consumer Commission of the transaction and is co-operating with the Commission’s informal merger review process.
