ANZ 1.02% $26.81 australia and new zealand banking group limited

anz gets green light but yet to show hand

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    ANZ gets green light but yet to show hand
    By Anthony Hughes
    September 26, 2003

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    ANZ shares were sold off yesterday on the increasingly likely prospect that it will buy the Lloyds TSB-owned National Bank of New Zealand for around $5 billion.

    As expected, New Zealand's Commerce Commission raised no objection to ANZ's clearance application - but whether shareholders will prove as easy to satisfy is less clear.

    ANZ shares fell 33c to $18 as investors brace for a major capital raising to fund the acquisition and remain fearful about customer losses from the potential union.

    Analysts said ANZ was now in the box seat (although Reserve Bank of New Zealand approval is required as well) to secure the asset and would be expected to pay no more than $5 billion.

    Prices as high as $6 billion have been mooted and analysts believe that were ANZ to pay much more than $5 billion, investors would be concerned about the impact on earnings per share.

    However, it is still possible that Lloyds will not sell at all if it doesn't get a good enough price. ANZ, which is already a top five bank in NZ, said it had not reached a decision or "made any commitments regarding the sale".

    Massey University banking expert David Tripe criticised the Commerce Commission's decision, arguing the ANZ application was inadequate.

    "There's a whole lot of stuff that's just nonsense in it," Mr Tripe said. "If it was presented to me as a student assignment, it would not have passed. But the NZ Commerce Commission thinks it's fine."

    Mr Tripe said ANZ's argument about the NZ banking market being "contestable" was not supported by the facts.

    Asked why the Commerce Commission supported the application, Mr Tripe said: "One possibility is that they feared they didn't have political support to reject it so there might be some government gutlessness."

    He said, for example, ANZ had argued that CBA had built its business in NZ from scratch when this wasn't the case.

    The NZCC's acting general manager, Geoff Thorn, wouldn't comment on the merits of the application but said it was not the only consideration in the decision.

    "We looked at the application and the competition in the market and we decided at the end of the day it would not result in a substantial lessening of competition," Mr Thorn said.

    "We very rarely get all of the information we need in the application. We generally go back and get additional information, but we don't pass judgement on the quality of the application."

    ANZ is expected to lob its final bid in mid-October, ahead of an announcement by the vendor late that month or early November. A successful bid would reduce the number of major banks from five to four and probably require ANZ to raise several billion dollars of equity capital.

    Mr Tripe said ANZ once had a good bank in NZ but had engaged in a "value destruction exercise" and had an "appalling record" in customer service.

    He said while he was unsure of the outcome, he believed that Lloyds was not a "desperate seller".

    "I don't think they are under serious pressure or anything [if they decide to keep the bank]," Mr Tripe said.

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