Australia’s biggest corporate transaction has passed its first test, with Westpac Bank entering a preliminary $19-billion-dollar bid to acquire St George Bank.
Much has been made of St George’s decision not to include a “break fee”, which leaves open the possibility of a rival takeover bid. Allens’ Ewen Crouch has a longstanding relationship with his client, and acted as the supervising partner for the demutualisation of the St George Building Society into St George Bank. When asked about St George’s decision, Crouch said that despite the omission of a break fee condition, he still characterised the deal as exclusive to Westpac.
“It’s not appropriate to comment specifically on any individual term of the transaction,” he cautioned, adding: “St George was prepared to give exclusivity and we have released the terms of the exclusivity to the market. That didn’t include a break fee, that just wasn’t part of what St George thought was appropriate.”
However, Gilbert + Tobin partner Gary Lawler and his team haven’t ruled out the possibility of a successful rival bid. Lawler heads up a team of Gilbert + Tobin partners comprised of John Williamson-Noble, Gina Cass-Gottlieb and Jason Lambeth.
“With these transactions, there’s always the possibility of someone coming out of the woodwork — a competitive bidder, one of the other major banks may be interested,” Lawler commented.
“That will obviously have an impact on [the merger] if they [another bank] puts an alternative proposal on the table, particularly if that’s a more attractive alternative,” Lawler said. “While it is possible, that’s just something we would deal with at the time, if and when, it arises.”
The involvement of Gail Kelly, former CEO of St George and current boss of Westpac, created a fair amount of legal red tape for the Gilbert + Tobin team. Reports indicate that she has been kept strictly at arms’ length from the entire merger process.
For its part, the Allens’ team was entirely satisfied with the way the potential conflict of interest had been handled by Westpac and its representatives.
“Mrs Kelly was highly regarded when she was at St George as an outstanding Chief Executive, and she has had no involvement with St George since August last year. So what’s been reported in the press about how Westpac handled all of that seemed to me to be very appropriate,” Crouch said.
Now that a process agreement has been reached between the two banking icons, both parties will undertake due diligence while working in parallel to negotiate a final merger agreement.
They will also be advising their clients about the merger and competition regulation issues surrounding the transaction.
Gilbert + Tobin declined to comment on the likelihood of the deal succeeding, but Lawler doesn’t anticipate any problems at the regulatory phase. “I think we can just say what Gail Kelly said which is that we don’t think this will have a major impact on competition,” he said.
Both firms will be devoting more resources to the bid as it enters the next phase. Gilbert + Tobin already has 25 lawyers working on the matter and expects the numbers to reach a peak during due diligence. Allens will also increase its team as the merger progresses,
“We’ve had a small, but focused, team working in the past on takeover defence strategies for St George, said Crouch. “That team now is getting much larger every day because of the things that have to be done.”
Crouch is working on the deal alongside Victoria Poole and Andrew Wong on the Allens’ Strategic Advisory Board.