Lady luck smiles on Westpac bid

While St George's shareholders - particularly its legion of retail investors - should never be taken for granted, the Dragon's $18 billion merger with Westpac is basically done and dusted.

Although we won't see the final conclusions of the independent expert's report for another three weeks or so, yesterday's announcement that Grant Samuel has swung behind the deal left the St George board little choice but to confirm its unanimous recommendation of the original terms.

There was a little icing on the celebration cake in the form of a special dividend - a face-saver of sorts for the Dragon's directors, who wore some criticism they had sold out too early and too cheaply.

To that extent, opinion is divided as to whether St George is helping Westpac get the deal over the line, or if it has won a victory of sorts by ensuring that the profit growth it has managed to achieve in volatile economic times goes to the people who still own the bank: its shareholders.

What should be remembered is that the one-off special dividend of $160 million to $180 million is equal to no more than 1 per cent of the total price, which is basically meaningless.

In light of that, yesterday's "revised" terms are a testament to the strong hand Westpac and its chief executive, Gail Kelly - ex-CEO of St George - held from day one.

Not only has it kept the same scrip exchange deal in place at 1.31 of its shares for every St George share, Westpac has got the target to agree to a $100 million break fee - which was resolutely rejected at the beginning of this saga back in May.

Back then there was the real possibility of a proper auction for St George despite the fact the global credit crisis (which ensured that Westpac's long-held ambition to buy Australia's fifth-largest bank could become a reality) had effectively knocked out many prospective international suitors.

Agreeing to pay such a huge sum would certainly have restricted the Dragon's room for manoeuvre in any such discussions. But, as we know, there's hardly been a whiff of a competing bid.

Kelly knew she was almost home and dry when, first, Commonwealth Bank ruled itself out and then National Australia Bank was stopped dead by self-inflicted debt write-offs that left its major investors refusing to back any assault.

The irony, then, of this particular merger/takeover is that while St George may have been secretly hoping to attract a white knight, it had already embraced one in the shape of Kelly herself.

Given their histories, it was always unlikely the Dragon's shareholders were going to resist Kelly's desire to bring them back into a fold she never really left.

We will see the results of that in November when the merger vote is held. But for the time being, the investment community can only step back and admire the persuasive power of a damsel out to impress. That and her luck.