MyState’s offer for Auswide Bank, having “an overall regard to … multiples [in comparable] listed transactions which include a premium for control and the attributes of these businesses compared to Auswide and MyState, it is our opinion that the implied multiples for Auswide and MyState are reasonable” corporate advisory firm Kroll has concluded.
Auswide engaged Kroll, a corporate advisory firm, to prepare an independent expert’s report on the MyState offer, lodged in August.
Kroll has assessed the value of the equity of Auswide “to be in the range of $215 million to $250 million, which equates to an underlying value per Auswide ordinary share of between $4.15 and $4.83.
“As our valuation is on the basis of a merger of equals analysis, our assessed value represents the underlying stand-alone value of a portfolio interest in Auswide and in that respect excludes a premium for control and the value for synergies that may be available to acquirers of Auswide” Kroll said in its report.
“We note that the closing share price of Auswide as at 16 August 2024 (the last trading day prior to the announcement of the merger proposal) of $4.35 falls within our assessed underlying value range.”
Kroll has assessed the value of the equity of MyState to be in the range of $420 million to $485 million, which equates to an underlying value per MyState ordinary share of between $3.75 and $4.33.
The market may have been a little dubious on the offer, or doubtful on the value in smaller banks more broadly, with the shares of both MyState and Auswide languishing over the two months since the MyState bid was announced.
On a combined basis, the merged group will have 23 branches across Tasmania and Queensland, will service more than 272,000 customers Australia-wide, and have lending assets of approximately $12.5 billion funded with approximately $9.6 billion of customer deposits.
The Merged Group business strategy “features highly complementary business models, with aligned strategy and values” Kroll said.
“There are potential estimated pre-tax cost synergies of $20 million to $25 million per annum (representing approximately 13.0% to 16.0% of the merged group cost base) arising from the merger proposal.”
The cost synergies primarily relate to consolidation and adoption of best available technology platform; refined board and leadership team; integration of shared services; and consolidation of third party providers.
“These synergies are expected to cost the merged group approximately $29 million on a one-off basis for costs such as migration of technology platforms, redundancies, and other one-off items.
“Notably, the majority of these expenses are anticipated to occur in the initial two years post implementation.”