Daily Brief Australia: Australia and New Zealand Banking Group (ANZ), Suncorp and more

In today’s briefing:

ANZ Bank (ANZ AU) Nixes MYOB, Yeas SunCorp Bank, To Raise A$3.5bn of Equity
ANZ Renounceable Entitlement Offer – Dilute Now, Accrete Later. Still Appears Better than MYOB
Suncorp’s Banking Sale to ANZ Will Unlock Value

ANZ Bank (ANZ AU) Nixes MYOB, Yeas SunCorp Bank, To Raise A$3.5bn of Equity

Australia and New Zealand Banking Group (ANZ) (ANZ AU) this morning made a flurry of announcements. First and foremost, ANZ withdrew from discussions on MYOB.
Q3 earnings ended 30 June saw revenue +5%, lending up 3%yoy, markets revenue +7%, NIM up 3bp (rising rates helps). Basel3 APRA Level2/Level1 CET1 Ratios were 11.1%/10.4%.
But the big news: ANZ is buying SunCorp Bank from SunCorp (SUN AU) for A$4.9bn (1.3x NTA), and will raise A$3.5bn through a 1 for 15 renounceable rights offering.

ANZ aims to raise around US$2.4bn (A$3.5bn) via a renounceable entitlement offer to part fund the purchase of Suncorp Bank.
In our view, neither the fundraising nor the acquisition appear to be particularly well flagged. ANZ’s withdrawal from MYOB talks might be the most positive thing about the announcement.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Suncorp (SUN AU) agreed to sell its banking business (Suncorp Bank) to Australia and New Zealand Banking Group (ANZ) (ANZ AU) for A$4.9 billion in cash. Completion targeted for 2HCY2023.
Suncorp Bank’s sale price is attractive. We estimate that New Suncorp (ex-banking) is currently valued at a 24% discount to Insurance Australia (IAG AU) on an FY2023 P/E basis.
Post-Completion, New Suncorp will be a leaner and more efficient business which will be better positioned to close (or even exceed) the valuation gap to Insurance Australia Group.

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