Macquarie to Buy ANZ's Dealer Finance Unit, Raise Capital

  • Macquarie ups 1H forecast, sees A$1.60/share interim dividend
  • Transaction to boost ANZ common equity tier 1 ratio by 20 bps

Macquarie Group Ltd. will buy Australia & New Zealand Banking Group Ltd.’s Esanda car dealer finance business and seek to raise A$400 million ($288 million) by selling shares to institutions to help fund the deal.

The Sydney-based bank said it needs A$800 million in initial capital for the purchase and also plans to offer stock to shareholders after it announces its first-half results later this month, it said in a regulatory filing Thursday. Macquarie increased the top end of the price range for institutional investors to A$80, a premium to Wednesday’s close, following strong demand, people with knowledge of the matter said. It had earlier offered them at A$75.50 to A$77.80.

The purchase will give Macquarie A$7.8 billion in additional loans, taking its total motor vehicle finance portfolio to about A$17 billion and adding 10 Australian cents per share to earnings in the first full year after the acquisition, it said. The loans comprise point-of-sale finance, funding for showroom stock and other Esanda-branded finance offered to car dealers.

“Macquarie’s share price multiple gives them the currency to go ahead and do such deals,” Brett Le Mesurier, a Sydney-based analyst at APP Securities Pty, said by phone Thursday. “Given the transaction will add to earnings, it seems reasonable for Macquarie. For ANZ, the equity release is much needed and will go towards filling the capital hole amid tighter regulation.”

Macquarie shares, which have more than tripled since the end of 2011, were halted from trading pending the capital raising. ANZ ended 0.8 percent higher at A$27.93 in Sydney compared to the 0.2 percent increase for the benchmark S&P/ASX 200 Index.

Stable Businesses

The acquisition will build on Macquarie Chief Executive Officer Nicholas Moore’s strategy to focus on businesses that shelter the firm from the boom-and-bust cycle of investment banking. It will face competition in vehicle financing from Westpac Banking Corp. and finance companies aligned with automakers.

ANZ said in a separate statement that the total purchase price for the Esanda portfolio is A$8.2 billion. Macquarie has sounded out five banks to fund the transaction, people familiar said earlier.

ANZ, which is looking to shore up capital amid regulatory changes, revealed plans to sell Esanda in May. The sale is expected to boost the bank’s common equity tier 1 capital ratio by about 20 basis points, it said Thursday.

The sale of Esanda’s retail portfolio, worth A$6.2 billion, is expected to be completed by Oct. 31, while the remainder will be finalized by the end of March, ANZ said.

Upgrades Profit

Macquarie increased its profit expectations for the six months ended Sept. 30 to a 55 percent gain from 40 percent due to higher performance fees. It said it expects to pay an interim dividend of A$1.60 a share. That would reflect a dividend payout ratio of about 50 percent, though the bank expects future payments to be in the 60 percent to 80 percent range.

Before it's here, it's on the Bloomberg Terminal.