Under the proposal, Bendigo Bank shareholders were to receive 0.748 Bank of Queensland shares and A$5.50 for each of their Bendigo Bank shares. Based on MondayÆs closing of Bank of Queensland shares, the merger valued Bendigo BankÆs shares at A$19.60 a piece, representing a 48% premium to its share price before the takeover was launched on March 16.
On Tuesday, Bendigo BankÆs chairman Robert Johanson said the board was rejecting the proposal because it did not provide sufficient value for shareholders. ôThe proposal involves significant risks, including integrating organisations with different business models and philosophies,ö says Johanson.
At a press conference, Johanson delivered the results of a retail shareholder survey conducted in the past couple of weeks which showed that only one-third of shareholders thought that the merger would deliver value to shareholders and that a large majority thought the proposal lacked sufficient information to make a decision. They thought the merger would lead to an erosion of the community bank model, job losses, a loss of key Bendigo Bank management, and a decrease in customer service levels.
Bank of Queensland responded to the rebuff with surprise, saying that the premium being offered should have been enough to sway investors, particularly institutional investors. Bank of QueenslandÆs managing director, David Liddy, says he will consider the bankÆs options, and that there is still ôcompelling logicö for the merger. ôTogether we are natural allies against the big banks,ö he says.
Market watchers say the deal may be revived. ôWe still expect some of Australia's smaller banking institutions to be swallowed up in a round of consolidation,ö says a banking analyst in Sydney. ôBank of Queensland might regroup and come up with a proposal that is less about price and more about preserving Bank of BendigoÆs uniqueness, and is presented in a more amicable scheme of arrangement,ö he says, referring to the somewhat hostile nature of the first bid.
Though finding a middle ground might be difficult. ôBank of Queensland operates a franchise model where branches are operated by owner-managers and Bendigo operates a community-based model,ö says the analyst. ôThere is some debate about whether these two models are complementary.ö
Bank of BendigoÆs shares closed at A$17 each on Monday when they were placed in a trading halt. This compares with A$13.21 a share prior to the bid being launched in March.
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