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New 'Kiwi' bank due by February

Thursday 16th September 2010

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New Zealanders will have a new, locally owned bank to invest in by February next year, through the proposed NZX listing of a merger between Pyne Gould Corp., its finance subsidiary Marac, and the Canterbury and Southern Cross Building Societies.

Plans for the new bank, which will be Christchurch-based and manage assets of $2.3 billion, took a big step forward this morning as directors from the four entities involved signed a merger implementation agreement.

The group has yet to apply to the Reserve Bank of New Zealand for a banking licence – a key requirement of the whole transaction, which will put together the assets of four strong regional lenders to pursue national scale.

No name for the merged entity has been decided, and the existing units will continue to trade under their own names until a branding process is completed, post-merger.

The target date for formally merging is January 1 next year, with an NZX listing proposed from February next year, an expectation of inclusion in the NZX50 index, and “the prospect of being able to pay regular dividends”.

“After extensive due diligence, evaluation and independent analysis, we are firmly of the view that the merger is compelling and will be beneficial to all parties,” said the chairman of the Establishment Board and chair at PGC, Bruce Irvine. 

“The outlook for a merged CBS, SCBS, and Marac would be substantially better than that for any of the parties on a standalone basis, particularly given the changing economic, regulatory and competitive landscape.”

PGC will remain a separate entity and will hold a 71% interest in Building Society Holdings Ltd – the temporary name for the new would-be bank - with CBS and SCBS constituting 14.5% each and individual shareholders of both building societies holding shares in their own right.

There would be a realignment “over time” of the combined asset portfolios, and more diverse debt and equity funding options were expected to become available to the enlarged operation.

Documents detailing the merger proposal will be distributed in early November for stakeholder meetings later that month.

Some 28% of the lending and 39% of the deposit base of the merged entity is in the earthquake-hit Canterbury region, with Auckland, Waikato and Bay of Plenty being its other existing areas of strength.

The merger is subject to various conditions, including the continuation of the government deposit guarantee scheme as currently outlined, and that the assets of the merged group should not decrease in 10% or more from August 31.

Shares in PGC were unchanged at 41 cents in trading on the NZX, while CBS’ stock rose 3.6% $2.85.

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