Westpac (ASX: WBC) today announced that it has struck a deal to purchase Lloyds Banking Group's Australian assets for $1.45 billion, making it the bank's largest acquisition since it purchased St George Bank in 2008.
The acquisition includes a number of "strongly performing businesses" including Lloyds' vehicle finance book, which is worth $3.9 billion, the bank's equipment finance book worth $2.9 billion and a corporate loan book worth $1.6 billion.
Although it was reported that the deal would need to be reviewed by the competition watchdog, the report stated that it is not subject to regulatory approval, although it has informed the Australian Competition and Consumer Commission of the transaction.
Westpac CEO Gail Kelly said "Importantly the transaction meets our strict acquisition criteria and shareholders will see a benefit to earnings per share in FY14." The deal, which was completely funded by internal resources, is expected to deliver around $100 million in additional cash earnings by FY2015, according to the company's release.
Lloyds' assets had caught the attention of other major banks, including Macquarie Group (ASX: MQG), ANZ (ASX: ANZ), NAB (ASX: NAB) and Commonwealth Bank (ASX: CBA), as it presented as an opportunity for growth in an otherwise limited industry.
However, with Westpac having won the bidding war, the bank will control an enormous share of the leasing finance market, given that Lloyds' Capital Finance business maintains a 20% share and Westpac-owned St George Bank controls a further 25% of the market. This will boost Westpac's returns in the long run.
Westpac's shares are up 1.7% in early trading following the news.
Foolish takeaway
Despite the acquisition and the opportunity for growth, shares in Westpac – like the other major banks – are still overvalued and remain unlikely to deliver market-beating returns in the long-term. It may be worth looking for other, more attractive opportunities to boost your portfolio's worth.
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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.
