Chance Of St George Cash Bid Fades

THE prospect of an all-cash bid to counter Westpac's $66 billion merger with St George Bank has receded after St George's chairman rejected the notion.

John Curtis said the scrip-based deal and the promise to retain much of St George as a stand-alone operation was more attractive than just taking a bidder's money.

Mr Curtis said in a letter to shareholders the main components of the Westpac deal outweighed the merits of an all-cash deal. In particular, the board considered the swap of 1.31 Westpac shares for every St George share, the guarantee to keep the St George brand and its branch network, and the additional financial worth it would bring to the merged bank were superior factors.

St George supports the merger, which puts a value of about $18 billion on the bank.

The NSW-based bank's backing was considered essential by Westpac, knowing that 60% of St George investors are small retail shareholders.

Mr Curtis' comments indicate it will be difficult for another large institution to derail the transaction unless it offers better share-swap terms and at least matches Westpac's promises.

Analysts have thought a rival cash offer unlikely because an overseas bank, or local competitor, would need to find almost $20 billion from credit-starved debt markets to fund an approach.

But a domestic counter-bid is almost certain to come from the likes of National Australia Bank, which has voiced its interest in the contest, but has to wait until a two-week exclusivity period expires.

NAB is likely to baulk at the St George directors' firm stance on retaining most of its business separately. Westpac has indicated it will raise its offer if such a bid eventuates.

St George's shares rose 24? yesterday to $33.52. That put them $1.77, or almost 5%, above the value of the Westpac offer, based on Westpac's share price of $24.23, down 63?, although 65? of that gap reflected Westpac going ex dividend.