Westpac and St George have agreed on merger terms, paving the way for the combined group to become Australia's biggest bank.
The announcement was made in a statement to the Australian Stock Exchange just after 9.30am (AEST) this morning, a day after shares in both companies were placed in a trading halt.
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St George Bank shareholders will be offered 1.31 Westpac shares for each St George share, valuing their current holdings at a 28.5 per cent premium to the stock's closing price last Friday, when they last traded.
The deal values St George Bank at $18.6 billion, or $33.10 per St George share. When complete, St George shareholders would own 28.1 per cent of the new entity.
Announcing the agreement today, the banks said the St George board had agreed to recommend the deal to shareholders.
They said the two organisations signed an agreement today providing for a two week exclusivity period, during which the parties would undertake reciprocal due diligence, and negotiate the detailed terms of a merger implementation agreement.
The board of the new group will include three current St George directors, including chairman John Curtis, who will be deputy chair of the new bank.
Westpac's chief executive Gail Kelly was formerly boss of St George bank, before moving companies in February.
A merged Westpac and St George would leapfrog Commonwealth Bank to become the nation's biggest bank by market value and would have almost 10 million customers and 1,200 branches nationwide.
Job, competition fears
Westpac, which approached St George for takeover talks after markets closed on Friday, insists it does not plan to close banks or remove ATMs.
But unions fear the merger will lead to job losses and have urged both sides to call it off.
The merger has also been met with resistance by consumer groups, who say it will lead to a reduction in competition in the banking sector.
Any merger will need to be approved by the regulatory authorities, and by Federal Treasurer Wayne Swan.