The reason for the two year cycle, according to a report in The Australian is that it coincides with a 90 day window of opportunity for Goldman’s to discuss the stake sale with its domestic joint venture’s 120 plus shareholders.

The arrangement is part of the deal that was negotiated when Goldman acquired its 45 per cent stake in 2003, and was designed to allow both stake holders to regularly review their Australian business.

Despite what many of Goldman rivals actually believe, the window of opportunity for the time being has closed, and the shareholding structure will continue as before.

The fact that for now there is no change in ownership, does not preclude that in the future Goldman will not pursue seeking full ownership of its Australian operations. Goldman Sachs executives have always had a cordial relationship with the management of its Australian joint venture, most of whom are now in fact from Goldman Sachs, which means there is no reason why a sale could not take place outside the traditional window of opportunity.

Australia is the only market which Goldman Sachs operates in where it does not exert 100 per cent control of its entity, and whilst an outright sale to the investment bank would make little difference to its Australian capital markets or M&A operations which are already well integrated with Goldman Sachs globally, full ownership would gives its sales and trading operation access to larger balance sheet funding.

In the immediate aftermath of the financial crisis, it was always unlikely that Goldman’s would initiate a stake sale or enter acquisition mode, but as the recovery builds momentum assessing its options is certainly much more realistic.

Despite the number of reasons for Goldman’s to initiate a full takeover, it may be still be reluctant to do a deal fearing it may upset key executives who already run a successful business franchise by appearing to take over full management control.

The deciding factor, of course, will be price.

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The Australian Competition & Consumer Commission sought the opinion of the central bank before granting regulatory approval for the 2008 deal.

Industry watchers have criticized the government’s decision to allow the fire sale of Bankwest and the merger of St George with Westpac as being the primary reason behind the reduced level of competition within the banking sector.

In defending his stance, Mr. Stevens said that rather than allow Bankwest to be left “twisting in the wind” during the height of the crisis, it was better for stability in the financial system to be re-inforced by allowing the lender to be acquired by CBA.

Mr. Stevens said that Bankwest had been left in a precarious situation after its British parent HBOS came close to collapsing, and as a result, its Australian subsidiary had to be sold one way or the other.

“I think in the environment that we were in, you don’t want an institution with a weakened parent to be sort of twisting in the wind while they work out in the UK what they are going to do. That was the situation we were facing.” Mr. Stevens told the Senate banking inquiry.

Mr. Stevens said his primary concern during the height of the crisis had been stability of the Australian financial system, which meant the prevention a bank failure and the requirement of finding a buyer for Bankwest which had relatively few takers at the time.

“Were I to be faced with that situation again, I don’t think you have much but to err on the side of stability. In situations of potential crisis it’s our job to try and preserve stability, which is what we sought to do,” the governor said.

Mr. Stevens said he could not remember whether the competition had sought an opinion from him or whether he offered one prior to the merger between Westpac and CBA.

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On Friday, Bell Financial Group, which is listed on the Australian stock exchange announced its intention to merge its two wholly owned subsidiary’s Southern Cross Equities and Bell Potter in a deal which would created a full service independent stock broker which provides services for both institutional and retail clients, as well as offer investment banking and research.

Southern Cross would fold into Bell Potter under its name.

Bell Potter has approximately 300 private client advisers as well as a financial planning operation, and the deal would combine that capability with the corporate and institutional expertise of Southern Cross.

Integration of the two companies is expected to occur from July 1st 2011, and signals a further consolidation of the equity broking industry.

The deal would catapult the merged broker above smaller rivals Euroz, Wilson HTM and Hartleys to sit alongside Patersons.

Charlie Aitken a Southern Cross director, and who is widely expected to run the institutional business of the merged entity says the deal positions the new company to better compete against second tier global investment banks “who we believe are people you can compete against”.

Mr. Aitken says he believes that the new company will eventually acquire to ten broker status, a list currently dominated by global investment banks such as Deutsche Bank and UBS.

“We think that there’s three or four very good global investment banks in Australia and then below that there’s a competitive space that we intend to fill.”

Colin Bell, chairman of BFG and founder of Bell Potter says that a combination of the two companies would boost revenue synergies in “a one plus one equals three” situation.

Southern Cross executives are expected to run the merged group’s institutional, research, ECM and corporate divisions, with Bell Potter people to head the private client and other businesses.

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The Australia Institute says that whilst the official rise in interest rates during the June quarter of last year was an average of 136 basis points, funding costs had risen by only 88 basis points.

Steven Munchenberg chief executive of the ABA says the think tank’s calculations were flawed, because the Australia Institute used interest rates that were averaged over a year.

According to calculations carried out by ABA statisticians, the official cash rate rose by only 68 basis points.

“My quotes were misrepresented — we don’t agree with the Australia Institute calculations or their conclusions. Clearly, if the Australia Institute was correct, bank margins would have grown enormously. The RBA and APRA have both said bank margins have fallen.” Mr. Munchenberg said.

According to the latest data from the Australian Prudential and Regulatory Authority (APRA), margins for the Big Four lenders fell from 2 per cent to 1.9 per cent for the year ending June.

CBA chief executive Ralph Norris echoed Mr. Munchenberg’s comments, saying that Australian lenders were not profiting from lifting their interest rates in excess of official rate rises.

“I think the RBA’s analysis is somewhat at odds with the Australia Institute, and I would tend to take the view of the RBA over the Australia Institute. If you work on averages, you have a situation where you have a starting point and the end point. When you take the average, you draw the line in the middle.” Mr. Norris said.

The Australia Institute rejected the notion that its calculations were inaccurate and said both CBA and ABA were “defending the indefensible”

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Suncorp is selling the division to Nikko Asset Management, a Japanese financial services firm that is seeking to enter the Australian market for $128.5 million. Tyndall manages approximately $18 billion for Suncorp, and the bancassurer will remain its major client even after Nikko assumes control of the business.

Over the last decade, Suncorp’s growth has largely been fuelled through acquisition. Many of its acquisitions brought with them businesses that were not core to Suncorp’s primary business activities. Suncorps ownership of Tyndall stems from its acquisition of Promina.

Since September, when current Suncorp chief executive Patrick Snowball assumed the helm, the company has embarked on a strategy of streamlining its operations by selling of non-core assets. The bancassurer decided that its fund management unit did not compliment its general insurance business.

Nikko is planning to use the acquisition as a platform for building a substantial business in Australia.

Nikko, which has $122.15 billion under management is currently owned by Sumitomo Trust and Banking which acquired its 64 per cent stake in the financial services firm from Citigroup last year.

Tyndall manages $25 billion of assets in New Zealand and Australia.

Charles Beazley who heads up Nikko’s international and institutional business said that Nikko is keen to build a business in Australia, which has one of the largest fund management markets in the world.

“We have ambitions to be the biggest fund managers in Asia, and so, in addition to a presence in Singapore, London, New York and Tokyo, we’ll now have a presence in Brisbane, Sydney, Melbourne and Auckland. It’s a good strategic opportunity for us as a company, but we also like the local opportunity that this acquisition signals.” he said.

Tyndall last year made a profit of $10.2m, so the sale implies a multiple of up to 12.6 times Tyndall’s normalised 2010 net profit.

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On Tuesday The Wall Street Journal reported that Hana Financial had already clinched the deal, after acquiring preferred business status for the 51 per cent stake which has been put up for sale by US Private Equity group Lone Star Funds.

Should Hana Financial ultimately prevail it would represent a significant setback for ANZ’s efforts to transform itself into a pan Asian player, with a strong presence in a developed market such as Korea.

Hana Financial is the fourth largest financial services player in Korea, and according to the Wall Street Journal, the company is already in exclusive negotiations with Lone Star, and a deal could be announced as early as next week.

For its part ANZ says it continues to conduct due diligence on the proposed transaction.

“Korea is an important market in the global economy with strong trade ties across Asia and ANZ believes that exploring strategic and organic growth opportunities in Korea is a logical fit with its super regional strategy,” the bank said in a statement to the Australian Stock Exchange. “ANZ has previously advised that it would only proceed with a transaction if it satisfies its disciplined criteria, including an anticipation of shareholder value accretion.”

The KEB stake that is being sold also includes Export Import Bank of Korea’s 6.27 per cent holding. Lone Star’s stake had a $3.8 billion valuation attached to it, however it is believed that Hana Financial had offered a 10 per cent premium to that valuation.

According to news reports. Hana Financial and Lone Star have already signed an MoU, with a sales and purchase agreement expected to follow shortly.

“We have signed a non-binding memorandum of understanding with Lone Star to take over Korea Exchange Bank. Currently, we are doing a due diligence study of Korea Exchange Bank.” Hana Financial chairman Kim Seung-Yu said.

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IF the report is true, it would mean that Hana Financial has managed to snatch the target company out of the arms of suitor ANZ, which has yet to confirm or acknowledge that a transaction has taken place.

ANZ was in the process of conducting due diligence on the proposed acquisition of the 51 per cent stake in KEB from Lone Star, and was the lender was thought to be the only buyer interested in acquiring the stake. News of a done deal with Hana Financial will most certainly come as a shock to ANZ.

Losing out on the deal would be a blow to ANZ’s aspirations of transforming itself into a super regional lender, even if the reported purchase price is higher than the level ANZ was prepared to pay.

The acquisition seems to have come out of nowhere, since it was widely believed that Hana Financial was the front runner for acquiring the impending divestment by the Korean Government of its stake in Woori Finance.

Lone Star acquired its stake in KEB for US$1.3 billion back in 2003. The 51 per cent stake is currently valued at US$3.8 billion. Lone Star has been shopping its KEB stake around for many months now, with several deals coming close to be concluded before collapsing for a variety of reasons.

ANZ chief Mike Smith for the last few months has been talking up the prospects of acquiring the KEB stake, saying the Korean banks specialization in trade and foreign exchange would be a good fit for ANZ’s portfolio of Asian assets.

He has also successfully sold the Asian story to investors so this deal would maintain momentum at a time when ANZ enjoys a market premium in Australia.

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It is widely expected that APH’s board will approve the proposed acquisition this week. AMP suspended trading in its stock on Monday pending a material announcement, whilst APH is also expected to undergo a similar suspension of trading.

A deal approved by the targets board will represent a coup for AMP which will end up owning APH’s Australian fund management business for just $300 million more than the price proposed during its first bid, following AXA SA substantially increasing the price it is willing to pay for APH’s Asian businesses.

As part of the terms of the deal AXA SA will underwrite the stock component of the deal which essentially places a floor underneath AMP’s stock price. The new bid is almost identical to the all cash bid that was made by NAB, which was accepted by APH’s board, but blocked by the competition regulator. AMP will not have to raise fresh equity in order to finance the deal and the bid is structured to give APH shareholders the ability to take advantage of any increase in AMP’s stock price.

AMP has a free run at Axa APH after a rival bid from NAB was rejected by the ACCC earlier this year.

AMP in its lobbying against the NAB bid argued that its acquisition of APH would give Australia the ability to build a fifth pillar in the Australian financial services industry.
Last week, as investors anticipated the imminent arrival of a new bid, APH’s stock price rallied 4 per cent.

Given APH’s French parent AXA SA’s intense desire to acquire its subsidiary’s Asian assets, it made sense for it to raise the level of its contribution to the renewed joint bid.

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Mr. Hockey made his comments during a radio interview on Monday said ANZ is close to spending $4billion on acquiring a controlling stake in Korea Exchange Bank (KEB).

“I say good luck to them, but do not ask Abdul the kebab maker in Parramatta Mall, or Sam the electrician, or Nick the builder, or Joe Hockey, or Alan Jones or anyone else to guarantee that bank in South Korea against failure,” Mr Hockey said. “That’s what we’re being asked to do.”

A spokesperson for ANZ said that the lenders international businesses were required to operate on the bases of the jurisdictions they were based in.

“So the Australian taxpayer, for example, does not guarantee our deposits in New Zealand,” the spokesman said.

The spokesperson added that the Federal governments guarantee on wholesale funding, a measure introduced during the financial crisis in 2008 was no longer operational. The parallel deposit guarantee is also scheduled to lapse in 2011.

“The deposit guarantee has not been needed and we support its withdrawal,” the spokesman said.

ANZ chief Mike Smith has previously criticized Mr. Hockey’s plans for banking reform, setting the stage for a testy relationship between the two.

During ANZ’s presentation of its full year results in October, Mr. Smith criticized Mr. Hockey’s nine point plan for banking reform comparing Mr. Hockey’s economic policy to that of Venezuelan president Hugo Chavez.

Mr Smith said the bank’s customer satisfaction rating of 80 per cent was “somewhat higher than what Mr Hockey’s is right now”.

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The deal is valued at $8.4 billion and will result in SGX acquiring all outstanding ASX shares through an arrangement scheme, paying $22 in cash, and 3.473 new SGX shares per ASX share.

The deal still requires regulatory approval from both the Australian and Singapore authorities, including Federal Treasurer Wayne Swan, The Monetary Authority of Singapore and the Australian Securities and Investments Commission (ASIC).

The transaction is expected to be approved by both regulators and shareholders during the first half of 2011 and the merger executed during the second half of the year.
The merged entity will have combined revenues of $1.12 billion, and earnings before taxation and interest of $711.6 million.

The market capitalisation of the combination of two exchanges was $12.5 billion on October 22nd.

The combined exchanges would give investors access to in excess of 2700 listed companies from over 20 countries and would provide the largest range of equity, fixed income and commodity derivatives in the Asia Pacific.

“The combination leverage’s the strengths of ASX through its listings, stock options and fixed income franchises, with SGX, the Asian gateway for international listings, equity futures and OTC clearing, to create the regions pre-eminent exchange group,” ASX said in a statement.

Both exchanges will retain their structure as separate legal entities and maintain their respective brands, with the holding company ASX-SGX Ltd listed on both the Singapore and Australian exchanges.

The merged company will have a 15 director board, four of whom will be nominated by the ASX. The chief executive of the combined company is expected to be SGX CEO Magnus Bocker, whilst Chew Choon Seng the chairman elect of SGX is expected to take the role of non-executive chairman, with ASX’s David Gonski to assume the role of deputy chairman.

It will have a board of 15 directors from five countries, four of whom will come from the ASX board – David Gonski, Russell Aboud, Jillian Broadbent and Alan Cameron.
Robert Elston CEO of ASX said that the deal was unanimously approved by the boards of both exchanges.

“In a period of profound structural change in financial markets, ASX has carefully considered its strategic options to enhance its future competitiveness,” he said.

“This combination delivers tangible value today and presents the opportunity for shareholders, customers, employees and other stakeholders to participate in the growth options that this broader based exchange group can make available in the future, whilst preserving strong governance and regulatory oversight in Australia.”

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