Sweetener provides extra payout for Dragon investors

The agreement between the two banks to ring-fence the largesse of the past 12 months will be worth between 28c and 32c a share, depending on StGeorge's final dividend, to be declared at the end of October. Last year it paid 86c a share.

In all, the Dragon's investors are likely to receive a total of $1.25 a share, including the special payout and a final dividend which is likely to be fixed at 95c if St George meets its forecast earnings growth of as much as 10 per cent.

If the bank meets this forecast, it will chalk up cash profits of about $1.32 billion - $160 million more than its record 2007 result.

Such a sum would be equal to a 28c-a-share payout, which would go to its shareholders as a final "thank you" before they vote in November to end StGeorge's 16-year history as an independent bank and fold its business into the bigger Westpac.

Details of the proposed payout were released yesterday after the bank - Australia's fifth-largest - confirmed the Herald's story that the independent expert reviewing the merger had agreed that Westpac's original terms were "fair and reasonable".

Although the firm's full report will not be published until the scheme-of-arrangement booklet explaining the governing of the deal is sent out at the end of this month, Grant Samuel declared the offer was in the best interests of St George's shareholders.

With no other bidder having voiced interest since Westpac made its move in May and no rival offer likely before November, the Dragon's directors reiterated their unanimous support for the deal. That will see investors get 1.31 Westpac shares for every St George share they own.

The St George board agreed to pay Westpac a $100million break fee if it reverses its recommendation between now and November's critical shareholder vote.

It had previously resisted making such a payment since there was a possibility back in May that another offer might emerge - despite the fact that the global credit crisis had severely curtailed the chances of a rival bidder being able to raise the money.

Yesterday's decision was a major victory for the Westpac chief executive and former St George boss, Gail Kelly, who also secured her former bank's agreement to accelerate co-operation between the two groups before the merger is actually finalised.

Westpac's shares yesterday rose $1.23 to $24.58, valuing each St George share at $32.20. That figure was a slight premium to the Dragon's closing price of $31.89, which was up $1.44.

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