Changes are happening - please bear with us while we update our site.

Changes are happening - please bear with us while we update our site. Click here to give us your advice and feedback.

BOQ (ASX:BOQ) to buy ME Bank for $1.325 billion

Bank of Queensland Limited (ASX:BOQ) has announced that it's going to acquire ME Bank for $1.325 billion, to create a compelling alternative to the big banks. 

Bank of Queensland Limited (ASX: BOQ) has announced that it’s going to acquire ME Bank for $1.325 billion, to create a compelling alternative to the big banks.

What is BOQ doing?

BOQ is going to buy the super fund-controlled ME Bank for $1.325 billion and it’s going to fund it with a $1.325 billion capital raising. The raising will be done with an underwritten 1 for 3.34 pro-rata non-renounceable entitlement offer as well as a underwritten $350 million institutional placement at a share price of $7.35 per share, a 12.6% discount to the last BOQ closing price.

The acquisition price implies an acquisition multiple of around 1.05 times ME Bank’s FY20 reported book value and about 11.9 times ME Bank’s FY20 underlying cash earnings.

Pre-tax annualised synergy benefits of approximately $70 million to $80 million are expected by the end of year 3 of ownership, with approximately 75% of synergies to be delivered on an annualised basis by the end of the second year after the deal is done. However, pre-tax integration costs are estimated to be between $130 million to $140 million, with the majority of these costs to be incurred within the first two years.

The deal is expected to be completed before the end of BOQ’s FY21.

How much will this add to BOQ’s earnings?

BOQ said the the deal will add to cash profit / earnings per share (EPS) by between low double digit to mid-teens including the full synergies in the first year (FY22). The deal is also expected to improve the cash return on equity (ROE) by over 100 basis points (1.00%) including full run rate synergies in the first year.

Non-financial benefits

Bank of Queensland said that the deal is expected to deliver material scale, broadly doubling the retail bank and providing geographic diversification. It will bring together two complementary brands, with shared customer-centric cultures and differentiated customer segments. Management believe that there is a clear pathway to a combined cloud-based digital retail bank technology platform.

BOQ trading update

The bank also gave a trading update, saying that it’s on track for a strong first half. It’s expecting to announce first half statutory net profit growth of 60% to 65% and cash net profit growth of 8% to 10%. The net interest margin (NIM) is expected to be around 3 basis points higher compared to the second half of FY20.

Summary thoughts

This seems like a really good update by BOQ. The acquisition seems well priced (for BOQ) and the bank has a big cost saving plan for the combined entity. BOQ does appear to have good prospects of taking on the big four banks if the deal is done. However, I’m not sure if the banking sector is good value right now unless interest rates are about to rise.

Before you consider BOQ, you can click on this link to ASX dividend shares and find lots of ASX stock ideas and analysis.

$50,000 per year in passive income from shares? Yes, please!

With interest rates UP, now could be one of the best times to start earning passive income from a portfolio. Imagine earning 4%, 5% — or more — in dividend passive income from the best shares, LICs, or ETFs… it’s like magic.

So how do the best investors do it?

Chief Investment Officer Owen Rask has just released his brand new passive income report. Owen has outlined 10 of his favourite ETFs and shares to watch, his rules for passive income investing, why he would buy ETFs before LICs and more.

You can INSTANTLY access Owen’s report for FREE by CLICKING HERE NOW and creating a 100% FREE Rask Account.

(Psst. By creating a free Rask account, you’ll also get access to 15+ online courses, 1,000+ podcasts, invites to events, a weekly value investing newsletter and more!)

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.
Skip to content