ACCC gives thumbs up to merger proposal
THE success of Westpac's $15 billion bid for St George rests largely with the latter's shareholders after the competition regulator yesterday gave preliminary permission for the two banks to proceed with a merger.
THE success of Westpac's $15 billion bid for St George rests largely with the latter's shareholders after the competition regulator yesterday gave preliminary permission for the two banks to proceed with a merger. The Australian Competition and Consumer Commission's ruling raised only minimal concerns about the combination of the banks' operations and has so far concluded that the deal will have little, if any, impact on competition within the banking industry.The ACCC reached its conclusion after judging the respective shares of Westpac and St George in the retail, business and corporate banking markets on a national basis, rather than on their state rankings, particularly in NSW and South Australia where they are among the strongest operators. The commission concluded that in even in those two states, the merged bank's market position in services such as transaction accounts and business lending would be about 25 per cent, or only slightly higher.That is at the top end of the 19 to 25 per cent range the ACCC estimates that the combined banks will have in the national market in a range of banking, wealth management and insurance sectors that were the subject of its six-week investigation.While that would give the $63 billion entity a powerful position (including propelling it to the top of the banking league table, nudging aside the Commonwealth) the commission said its domestic and international rivals would be sufficient to rein in its new market power.The ACCC also addressed the view of many parties who responded to its inquiry that St George, as Australia's fifth-largest bank, had an important role in competing on price, products and service with the Big Four - Commonwealth, National Australia Bank, ANZ and Westpac.That belief was bluntly rebutted in its 10-page statement of issues report. "The ACCC has not seen evidence to suggest that St George is a price leader in any of the relevant markets," it says, while emphasising that smaller regional banks and credit unions did even better than St George on service levels.The commission's only big concern was the dominance that Westpac and St George would command in the specialist area of wealth management with their BT and Asgard wrap platforms, which offer fund and superannuation investment information to financial planners and investors.It has extended its inquiry until August 6 for more responses, with the aim of giving its final judgment on the merger a fortnight after that.Westpac, which is now headed by St George's former chief executive, Gail Kelly, welcomed the ACCC's report as clearing a significant hurdle in the merger process. The deal's timetable envisages a vote in November by St George's shareholders on the 1-for-1.31 share swap terms.Westpac's shares yesterday rose by $1.44 to $22 while St George gained $1.80 to $28.75. The merger offer now values each St George share at $28.82.