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- WBC pays $1.45 billion for Lloyd Internationals Australian Assets
- WBC expects FY14 accretive
- Support: 31.85, Resistance: $34.79
The spend includes $1.19 billion of net tangible assets and $260 million of goodwill, equating to 1.2 times book spend.
The small premium is not surprising considering Lloyd’s mantra at the moment is to strip out its international assets from the balance sheet as quickly as possible so that it can concentrate on the UK and Europe assets. That mantra has left WBC with a relatively cheap deal.
Total assets are expected to total $8.4 billion, broken down into the motor vehicle finance book of $3.9 billion, equipment finance of $2.9 billion and the corporate loan portfolio of $1.6 billion.
WBC expects deal to FY14 accretive
When equated to WBC’s expected earnings of $7.1 billion come November 2, the deal appears even smaller however it is expected to be accretive to FY14 and should add $100 million in expected earnings in FY15. WBC sees further upside potential with penetration of the Lloyds’ customer base and better-than-expected synergy outcomes which could see this deal being highly attractive in years to come.
The synergy costs are expected to be $70 million per annum with an upfront $130 million integration cost. However this is again small change for WBC, who will fund the deal through ‘internal sources’ and considering WBC has $1.5 billion of cash and frank credits on the balance sheet is it not hard see why WBC is funding this off the books rather than through a raising or debt.
This may disappoint income shareholders who had been hoping for a special dividend come November 2. However, I believe this is a better longer term deal for a bank that is running out of external assets it can acquire and is having to look at organic growth for ways forward.
WBC had seen sustained selling over the past week which had pushed it back to the 62% retracement level of $31.85 having broken the upward trend. The support at the 62% retracement of the all-time high to the June low looks solid and WBC has bounced off this mark. With its full year earnings three weeks away, history would suggest WBC will rally into the results. This should put the all-time high back within reach of investors.