St George Bid To Get Final Ok

ST GEORGE Bank's board is expected to give final endorsement to Westpac Bank's $18billion-plus takeover offer this week, ending long-running speculation the smaller lender could extract a sweetener under the all-scrip deal.

A report by independent expert Grant Samuel that the St George board commissioned will be lodged with the Australian Securities and Investments Commission.

It is believed a draft copy of the report has thrown its support behind the deal.

While the Grant Samuel report won't be made public until the release of a scheme booklet later this month, the fifth-biggest bank is expected to issue a statement throwing its support behind the deal within the next few days.

A focus of the report has been on issues surrounding funding and the impact of dislocated financial markets on St George as it carries a riskier credit rating than Westpac.

Queensland-based Suncorp recently acknowledged international funding markets remained tough for banks with smaller balance sheets.

"For all intents and purposes, and with the possible exception of country champions, the European market has been, and will remain, a challenge for a single-A issuer," Suncorp chief financial offer Chris Skilton told analysts.

St George, which also has a single-A credit rating, is preparing to replace $1.7 billion in short-term wholesale funding that is scheduled to mature over the next six months. This is on top of its additional funding requirement of up to $12 billion for fiscal 2009.

St George chief executive Paul Fegan is scheduled to make a presentation at a Merrill Lynch investment conference in New York tonight and will return to Australia later this week.

St George shareholders will then have a chance to vote on the deal in early November.

The Australian Competition and Consumer Commission has approved the planned merger, saying the banking giant would still face strong competition from other banks, credit unions and building societies.

Westpac has promised to retain the St George brand and branch network under a merger.

It is believed large St George shareholders including Milton Corp and Andrew Sisson's Balanced Equity Management have urged the St George Bank board to open talks for a higher offer.

Concerns have been raised that St George was too quick to endorse an offer that was valued well short of a placement of $35 a share made to fund managers in November last year.

Westpac's all-scrip offer is valued at $30.49 per St George share. This is a slight premium to the $30.45 a share St George closed at on Friday, with the market betting a rival offer to come forward at this hour is unlikely.

In recent months Westpac's implied offer has fallen as low as $24.47, but shares in the bigger bank have since staged a rebound.

The acquisition delivers Westpac a dominant slice of the NSW and South Australian home and business lending markets and makes it a powerful force in funds management.