BHH Consortium Questions National Bank Sale
MEDIA RELEASE for immediate use
24 October 2003
BHH CONSORTIUM QUESTIONS NATIONAL BANK SALE
The New Zealand bid to buy the National Bank, Black Horse Holdings Consortium (BHH), is questioning, as illogical, the process pursued to sell the bank.
"We are reading media reports that the owners of the National Bank, the UK based Lloyds TSB Group, are concluding a sale to ANZ Bank, for only $5.5 billion," says BHH chairman Phil Verry.
"By any assessment, that is a fire sale price, which is likely to deprive Lloyds shareholders of around $5 billion, if full value had been extracted. The low price, of $5.5 billion, contains a very large implicit discount due to the expectation of substantial post-merger loss of market share once Lloyds bail out to the ANZ Bank," he says.
A sale to the ANZ Bank is viewed in New Zealand as probably the least attractive outcome. A survey by the University of Auckland Business School estimated 18% of National Bank customers would leave if the merger eventuated.
"The $5 billion premium, that Lloyds shareholders could have had, recognises that discount, but, more particularly, it allows for the ability of the BHH Strategy to increase the size of the assets, profits and value of the National Bank by giving expression to the strong sentiment in New Zealand for the bank to be New Zealand controlled, combined with powerful multi-layered incentivisation to achieve that growth," says Phil Verry.
"It is, by far, the most powerful commercial strategy we have designed. Even more powerful than our 1993 wool stockpile disposal strategy, which led to Australasian wool growers gaining in excess of $10 billion over 6-7 years. We informed Lloyds of that."
Mr Verry said BHH received a conference call from executives of Lloyds and Deutsche Bank as recently as Tuesday of this week, which appeared to express interest in the BHH Strategy.
"We have been seeking the opportunity to personally acquaint Lloyds with the robustness of the BHH Strategy and to enter into substantive negotiations, so we followed-up, offering to fly to Sydney. We also offered them independent reports from two respected international firms - a strategic marketing firm and an investment banker, respectively - to validate the credibility of the BHH Strategy."
"Since Tuesday, there has been no response, so if Lloyds have sold they did so without canvassing the market for the best outcome for its shareholders, let alone the staff and customers of the National Bank and the people of New Zealand. We are surprised that an organization such as Lloyds TSB Group would make a sale while ignorant of a potentially far better price," says Mr Verry.
Mr Verry estimates the impact upon the New Zealand economy of a sale to the ANZ Bank, versus acquisition by BHH, at more than $500 million per annum, in the near term, increasing over time.
"That loss assessment has two elements: wealth transfer to Australia due to New Zealand redundancies (approx 3,500 bank staff), branch closures and loss of business to support services provided by New Zealand firms to the National Bank, which is the only major bank headquartered in New Zealand; and, on the other side, the growth to the bank's profits, for the benefit of the New Zealand economy, which would have been derived from the BHH Strategy but which will now be lost to Australia."
"With the National Bank sold at a fire sale price it is a disappointing way for Lloyds TSB Group to exit New Zealand after 130 years of loyal support from New Zealanders who, effectively, have been shut out of the sale process."
Mr Verry says the potentially greatest cost to New Zealand will be the loss of intellectual property in the operation of large-scale full-service trading banks. The National Bank is the only such bank headquartered in New Zealand. With the closure of its Wellington head office, the entire major trading bank market will be controlled from Australia. He says this will have serious implications for foreign control over the New Zealand economy.
"The supreme irony is that the undesirable situation that has developed here, would not be allowed in Australia, by its officials and government."
"Our Consortium is absolutely confident the BHH Strategy gave New Zealanders the best opportunity to acquire control of the National Bank. It is the only strategy that is positive: for Lloyds' shareholders; for the National Bank; for its staff and customers; and for the New Zealand people. In more usual circumstances it would have succeeded."