ANZ share price halted amid $5b Suncorp Bank deal and mega cap raise

ANZ is making a blockbuster acquisition…

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Key points

  • ANZ shares are in a trading halt while the bank undertakes a capital raising
  • It is aiming to acquire the banking operations of Suncorp for $5 billion
  • ANZ also released a third-quarter update which revealed solid top line growth and improving margins

The Australia and New Zealand Banking Group Ltd (ASX: ANZ) share price won't be going anywhere today.

This morning the banking giant requested a trading halt ahead of a blockbuster acquisition.

Why is the ANZ share price halted?

The ANZ share price has been halted this morning while the bank undertakes a capital raising to fund the acquisition of the banking operations of Suncorp Group Ltd (ASX: SUN) for $4.9 billion.

According to the release, ANZ is aiming to raise $3.5 billion through a fully underwritten 1 for 15 pro rata accelerated renounceable entitlement offer.

These funds will be raised at $18.00 per new share, which represents a 12.7% discount to the ANZ share price at Friday's close.

The purchase price of $4.9 billion represents a PE of 13.8 times pre synergies or 9.3 times post full run-rate synergies. The acquisition is expected to be earnings per share neutral pre synergies and low single-digit earnings per share accretive including full run-rate synergies on a pro forma FY 2023 basis.

Why acquire Suncorp Bank?

A decade after first attempting to acquire Suncorp Bank, ANZ has sealed a deal which it believes will accelerate the growth of its retail and commercial businesses while also improving the geographic balance of its business in Australia.

The release notes that the acquisition includes $47 billion of home loans with strong risk profile, $45 billion in high-quality deposits, and $11 billion in commercial loans.

ANZ will initially operate Suncorp Bank under its existing Authorised Deposit-taking Institution licence and there will be no changes to the total number of Suncorp Bank branches in Queensland or employee numbers for at least three years from completion.

It will continue to be led by current CEO, Clive van Horen

'A cornerstone investment'

ANZ's chief executive officer Shayne Elliott spoke very positively about the acquisition. He said:

The acquisition of Suncorp Bank will be a cornerstone investment for ANZ and a vote of confidence in the future of Queensland. With much of the work to simplify and strengthen the bank completed, and our digital transformation well-progressed, we are now in a position to invest in and reshape our Australian business. This will result in a stronger more balanced bank for customers and shareholders.

We have admired the transformation that has occurred under the leadership of Steve Johnston and Clive van Horen and believe Suncorp Bank is a natural fit with ANZ given its culture, risk appetite and customer focus. ANZ has licenced the Suncorp Bank brand for five to seven years and we are committed to maintaining its current branch footprint in Queensland for at least three years post completion. This is a growth strategy for ANZ and we will continue to invest in Suncorp Bank and in Queensland for the benefit of all stakeholders.

Trading update

In other news, ANZ has released its third quarter update and revealed that had a solid three months.

ANZ advised that strong lending and margin momentum was evident across all major businesses in the quarter, with revenue up 5%. Deposits were flat excluding foreign exchange impacts.

Pleasingly, the bank's group net interest margin (NIM) increased 3 basis points. This was largely driven by the impact of rising rates, partly offset by intense price competition in the home lending portfolios in Australia and New Zealand.

With interest rates projected to increase further in coming months, management is expecting this to be supportive for margins in the fourth quarter.

Finally, the bank revealed that it has withdrawn from acquisition talks with MYOB.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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