St. George, Westpac push ahead toward deal

St. George Bank Ltd. and Westpac Banking Corp. took another step Monday to pave the way for Westpac's proposed $16 billion buyout of the smaller banking group in a deal that would create Australia's biggest bank.

The deal still requires shareholder and regulatory approval. In the all-share deal, St. George shareholders would get 1.31 Westpac shares for each St. George share they hold.

The agreement signed Monday extends the exclusivity period for the planned takeover but does not prevent St. George from considering any superior proposals that may emerge. Some analysts have previously said they doubt other Australian banks could construct a deal as attractive as the one offered by Westpac.

The deal has the backing of the St. George board in the absence of any superior offer.

Westpac boss Gail Kelly, who formerly headed St. George, said the buyout would create "a springboard for growth with strong brands, leading products and an extensive distribution network."

"Each bank's customers will also benefit from greater diversity and choice of products from both organizations."

Westpac has pledged to retain the St. George, banks and Assuaged brands with no net reduction in ATMs or the retail network, the two lenders said in a statement.

A combined Westpac and St. George would have a AA credit rating, putting the merged entity in a strong position in the current financial environment, the statement said.

The deal comes less than four months after Kelly took the helm at Westpac and ends years of speculation about a deal between the two Sydney-based banks.

Analysts expect that Australia's other major banks, including National Australia Bank Ltd. (NAB) and Commonwealth Bank of Australia (CBA.AU) may look to foil the bid, either by lobbing a rival offer or taking a blocking stake in St. George. The chief executives of both banks have declined to rule out a rival offer.

A combination of St. George and Westpac would have more than 10 million customers and control a quarter of Australia's home loan market.

St. George shares rose 0.59 percent to 32.51 Australian dollars. Westpac shares rose 0.76 percent to 22.68 Australian dollars.