Westpac ahead in race for Lloyds

DataRoom: Bids for Lloyds' Aust business, worth about $10bn, due Monday.

Westpac Banking Corporation (WBC) is the clear front-runner to buy Lloyds Banking Group Plc’s Australian business, worth about $10 billion, as local and foreign banks put together financing packages for multiple parties by the final bidding deadline of September 30.

“Westpac has a 90% chance of winning this deal,” says one senior banker. “It’s their deal to lose.”

Lloyds' Australian business consists of car leasing business worth about a $6.5 billion while the remaining assets are a corporate loan book whose distressed credits have been largely trimmed by a series of auctions that have attracted hedge funds and investment banks.

Westpac is seen as the most likely winner of the Lloyds auction because its car leasing business is a clear No. 1 in the Australian market. This makes Westpac willing to pay more for the Lloyds’ assets as it believes it can integrate and create synergies with another car leasing business as well as integrate a corporate loan book into its own.

As the one of the largest acquisitions in the Australian market in recent years, the sale of Llyods has attracted a host of banks who have approached bidders offering financing.

The financial institutions keen to work on the deal include Commonwealth Bank of Australia Ltd, National Australia Bank Ltd, Citigroup Inc, JPMorgan Chase & Co, Credit Suisse Group AG, Deutsche Bank AG, Sumitomo Mitsui Banking Corp and Bank of Tokyo-Mitsubishi UFJ Ltd.

Funding has yet to be secured by potential acquirers who are still negotiating terms and conditions with their potential bankers. Westpac’s rivals include Pepper Group, who have formed a consortium with General Electric Capital Corp and Bank of America Merrill Lynch.

Macquarie Group (MQG) is also expected to bid for Lloyds’ Australian business at the end of the month.

The bidders for the Lloyds business and potential financiers of the transaction declined comment or did not return calls seeking comment.

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