Bank of Queensland has acquired industry super-owned ME Bank for $1.325 billion.
The move sees BOQ acquire 100% of ME Bank for $1.325 billion cash, funded by an underwritten capital raising of $1.35 billion. The price represents 1.15 times ME's net tangible assets.
Combined, ME Bank and BOQ will have total assets of $88 billion and total deposits of $56 billion.
BOQ said the acquisition creates a compelling alternative to Australia's big four banks.
"Today's announcement is another major step in our strategy to be the leading customer-centric alternative to the big banks. With the addition of the ME Bank business, BOQ now has material scale and a compelling growth platform to support this ambition," BOQ chair Patrick Allaway said.
"The combination of our highly complementary businesses brings together two organisations with a shared purpose and values generating greater value for customers, employees and shareholders. This is underpinned by the successful revitalisation of the bank since early 2020 with the team's strong execution capabilities being reflected in our earnings progress to the half."
ME Bank is currently owned by 26 industry superannuation funds, which unanimously endorsed BOQ's offer as recommended by the board.
The transaction will be finalised by August and ME Bank's brand, operations and Melbourne-based presence will be retained.
"Today's decision represents a permanent shift for the better in the Australian banking landscape. This agreement brings together two culturally aligned organisations to form what will be an enhanced and influential banking alternative for customers," ME Bank chair James Evans.
"The increased scale and complementary offerings will benefit customers and employees alike. The combined group will be able to offer a wider network of service options, deeper resources, and the added reassurance that comes with a larger banking organisation."
ME Bank said the benefits of greater scale will enable it to compete with the big four, giving it additional capital, funding and expertise to invest in enhanced products and services.
"We are truly excited to be able to welcome ME Bank customers and team members to the BOQ Group family. There is no doubt this is a tailor-made match because of our common objectives and customer-first cultures," BOQ managing director and chief executive George Frazis said.
"Our multi-brand strategy at BOQ means that the ME brand will be maintained, and their people will be able to continue doing what they do best - offering simple and straightforward banking products and terrific service to their customers. We are looking forward to the future with ME Bank on board."
The industry fund shareholders of ME Bank are yet to comment on the acquisition.
The Finance Sector Union said that ME Bank staff have been anxious about their futures amid reports of an impending sale recently.
"ME Bank employees have worked hard over many years to build this bank to the point where it has become an attractive acquisition for a retail bank like Bank of Queensland," FSU national secretary Julia Angrisano said.
"It is important that the new owners recognise that while they are buying the trusted ME brand, the bank's loan book and its depositors' accounts, it is also taking over the livelihoods of the staff."
She added that the FSU represents members of both banks, and that it views ME Bank maintaining its brand and Melbourne operations as a positive indication for worker.
In May 2020, ME Bank faced scrutiny from the House of Representatives Standing Committee on Economics in regards to its relationship with the 26 industry funds invested in the bank.
It was revealed at the time that the bank never paid a dividend to its investors - which include AustralianSuper, Hostplus and UniSuper.
Former ME Bank chief executive James McPhee defended the bank at the time, saying that there was a possibility for big profits for the funds if the bank continued along its growth trajectory.
In September 2020, ME Bank chief executive Adam Crane commented on whether the bank's super fund investors were likely to sell out soon:
"We have a very clear relationship with our super funds on the level of return they would like to see. We're certainly achieving that on an underlying basis, we would have achieved that this year on a statutory basis, except we took a provision for the COVID-19 as is appropriate," he said.
"The shareholders will have to make their own decisions over time on what they want to do. If we deliver the returns, I see no reason why the current arrangement can't continue."