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Stay With The National Bank


MEDIA RELEASE - for immediate use
30 September 2003


That's the message from the Black Horse Holdings Consortium (BHH), the New Zealand bid to buy the National Bank. It is calling on customers who resent the prospect of their bank being purchased by ANZ Bank, Australia, to not prematurely transfer their banking business to other banks, at least until the final outcome of the sale of the National Bank is known.

'There is a lot going on behind the scenes" says BHH Chairman Phil Verry.

Without going into detail about the possible purchase, he said he "remained even more confidant BHH will be regarded as the preferred bidder, when the time comes."

The Consortium recently visited Australia and Europe to establish working relationships with targeted professional firms and financial institutions, which complement and complete the BHH Consortium structure.

With a unique growth strategy focus, BHH expects to have the capability to structure a deal with the vendors, UK-based Lloyds TSB Group, which would be materially superior to any other bid for the National Bank. It would also provide the best result for the National Bank, staff and customers. "Although we cannot say too much at this stage, if BHH succeeds, customer loyalty to the National Bank will also be well rewarded", says Verry.

Verry confirmed Lloyds' own statements recently that National Bank customers should not read too much into some media reports that the National Bank sale has become a one-horse race, with the ANZ Bank the only participant.

"In any case", he says, "as the ANZ Bank itself has indicated, it is by no means certain it will continue with its bid. Our analysis supports most other analysts that ANZ faces enormous challenges before it can be confident it can create added value for its existing shareholders. Significantly, Westpac and other Australian banks have already pulled out for much the same reasons that ANZ management will now be considering."

Many analysts predict that ANZ Bank could struggle to justify a sufficient price, given the expected erosion of market share that such a mis-match of cultures would create. Last week's NBR/Phillips-Fox poll found that 87% of those polled did not support the idea of an ANZ/NBNZ merger.

Verry says it is obviously difficult for management and directors to justify such a major acquisition to their shareholders, when potential rationalisation gains are small, but the probable erosion of value of the acquired asset is large. The new loading of debt or equity still has to be serviced, somehow, if existing ANZ shareholders are to avoid loss of share value.

Meanwhile, BHH is expecting to seek formal approval for its acquisition plan, from the Reserve Bank shortly. Verry expects the Reserve Bank to have more regard for the national interest than the Commerce Commission, which, due to its narrow focus and disregard for wider national interests, has practically made itself an "irrelevancy".

Verry would not comment on details of the sale process, but did discount the likelihood of a partial float by Lloyds TSB Group. "In its present form, the National Bank's profitability is already fully optimised so, without a new and sustainable growth strategy, its listed shares would be lacklustre performers. For such minor gain, Lloyds would severely compromise its future strategic options and, on the balance of probabilities, would undermine its investment value", he says.

BHH expects the bidding process to be complete in the next six to eight weeks.


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