Suncorp investors want cash, not scrip, if Bendigo comes knocking

afr.com:

Suncorp shareholders and analysts are wary that Bendigo & Adelaide Bank could offer a compelling alternative for its banking arm compared to ANZ’s $4.9 billion all-cash takeover bid.

ANZ launched its bid last July but after a prolonged regulatory review, the Australian Competition and Consumer Commission blocked the transaction last week because it might reduce competition. Still, the ACCC did suggest it was amenable to a merger with a smaller player such as Bendigo.

ANZ’s bid for Suncorp’s bank arm has been rejected by the ACCC. Matt Dennien

ANZ and Suncorp – which wants to get out of banking to focus on its insurance arm – said they would appeal the ruling to the competition tribunal, potentially delaying the merger for a further six to 12 months, even as analysts observe that the deal was becoming “increasingly unpopular” for the big bank’s investors.

David Berthon-Jones, joint chief investment officer of Aequitas Investment Partners, whose portfolios hold Suncorp shares, said the ACCC decision was bewildering and it was worth appealing.

The ACCC seemed to be making its arguments based on how it would like the competitive landscape to be, “as opposed to the commercial reality”, Mr Berthon-Jones told The Australian Financial Review.

Mr Berthon-Jones said regional banks, given their smaller sizes, would not improve by merging with Suncorp’s bank. Regarding the capital efficiency viewpoint, he said it was about who could get the most value for stakeholders.

Although Bendigo has not tabled an offer, it has sounded out Suncorp to acquire its banking arm. It raises questions about what mix of cash or shares Bendigo could offer in any bid, with cash the most preferred option.

“Cash is generally better, particularly if you