Dragon ties knot, jobs on agenda

The endorsement, which followed a modest $160 million sweetener in the form of a special dividend to St George shareholders, has paved the way for the nation's biggest banking deal to proceed.

As foreshadowed in The Age, St George chairman John Curtis said the StGeorge board had unanimously recommended shareholders vote on the deal after an analysis of the transaction by independent expert Grant Samuel threw its support behind the all share transaction.

Westpac agreed to an 11th-hour sweeter following unrest among some institutional investors over pricing. This equates to a special dividend of 28 per StGeorge share on top of a final dividend of up to 97 a share.

Still, the move will not cost Westpac, with pricing on the all-scrip deal unchanged at 1.31Westpac shares for each StGeorge share. Before dividends, this represents $32.20 per StGeorge share based on yesterday's closing price.

A source close to the talks said the the special dividend, which had emerged over recent weeks, was not regarded as a "deal breaker". However, it was a concession Westpac had been prepared to make to ensure full co-operation on the merger.

As part of the final agreement, St George also committed to paying a $100 million break fee if it decided to walk away from the transaction. St George had strongly resisted a break fee during the initial days of the merger so as not to turn away any rival offers, but none had emerged in the four months since the deal was revealed.

The merger on the terms proposed, "is a very positive outcome for St George shareholders", Mr Curtis said yesterday.

Independent expert Grant Samuel concluded the merger was "fair and reasonable" and in the best interests of St George shareholders.

Final approval is needed by federal Treasurer Wayne Swan although, with the Australian Competition and Consumer Commission already giving permission for the deal, few expect Canberra to represent a stumbling block.

Macquarie Equities analyst Tom Quarmby said the special dividend was expected to speed the integration process for Westpac.

"It meets the expectation that Westpac probably had all along - that they would have to throw something extra in," he said.

"But it's less than 1% of the deal price and it gets the unanimous support that Westpac really want".

Grant Samuel's analysis will be released at the end of the month.

A draft of the report will be lodged with the Australian Securities and Investments Commission this week.

KEY POINTS

? A sweetener of 28 a share unruffles feathers.

? St George reluctantly agrees to $100 million break fee.

? Final approval of the federal Treasurer is needed.

LINK

? www.stgeorge.com.au