Big four ASX bank Australia and New Zealand Banking Group Ltd (ASX: ANZ) has eyes on an acquisition target in the ASX 200 (ASX: XJO).
According to reporting by the Australian Financial Review, ANZ is looking to buy the banking division of Suncorp Group Ltd (ASX: SUN).
If a deal were to go through, it would make the acquisition the largest Australian banking deal in over 10 years.
What’s the speculation?
The AFR reported that Suncorp chose to talk to ANZ for a “round of intensive talks” as it wants ANZ to buy the business. ANZ and Suncorp have reportedly signed a ‘process deed’, entered into exclusive due diligence and have given access to the management of each team.
There is both a willing buyer and a willing seller. ANZ wants to become bigger, while Suncorp wishes to focus on being an insurance business.
There was a figure of $5 billion suggested. That compares to Suncorp’s total market capitalisation of $14 billion, so it would be a sizeable chunk of the business being sold.
If the deal were to go ahead, it would boost ANZ’s lending by $60 billion, with around 80% of that being mortgages. ANZ really wants to maintain and grow its market share, as it tries to improve its technology.
What would this mean for each business?
For ANZ, it would be a boost and make up for some of the growth it has missed out on in recent years. If the deal were to go ahead, ANZ still needs to decide whether it would pay cash or shares for the business.
It is an interesting move by Suncorp to sell its banking division. While it could unlock real value for Suncorp shareholders, it would reduce earnings and reduce its diversification. However, it would allow Suncorp to completely focus on the insurance side of the business, which is what it specialises in.
Would it be a good price for ANZ? Only time will tell. It’ll be interesting to see whether the deal goes ahead or not.
