Australia Regulator Questions Benefits of ANZ’s $3.3B Suncorp Buyout

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Australia’s competition regulator said it was unconvinced a planned A$4.9 billion ($3.32 billion) buyout by Australia and New Zealand Banking Group Ltd. of a smaller rival would bring public benefits, in a blow to one of the year’s biggest deals.

The Australian Competition and Consumer Commission (ACCC) said in a “statement of preliminary views” that ANZ had so far failed to prove it and the insurer whose banking unit it plans to buy, Suncorp Group Ltd., would both end up stronger.

Though the ACCC has yet to give a final decision, the feedback puts new pressure on ANZ to explain its case that the public benefits of one of Australia’s biggest banks taking over a large second-tier competitor would outweigh the loss of a market participant.

The information provided so far was insufficient to substantiate the “nature, likelihood and extent of the claimed public benefits, including ANZ’s estimates of future synergies that will be achieved,” the regulator said.

ANZ had also failed to explain its public commitments to invest billions of dollars in the home state of the takeover target, Queensland, and “invites views about whether this constitutes a public benefit,” the ACCC said.

ANZ said it expected questions from the government and regulators when it announced plans to buy Suncorp’s banking arm in July 2022, and it welcomed further community consultation that would now occur. It continued to expect the deal to close in the second half of calendar 2023.

Suncorp said it would provide a comprehensive response to address the ACCC’s concerns, and the deal remained in the best interests of the company. Suncorp will become a pure insurance firm if the deal is completed.

Though Australian retail banking is dominated by four lenders, the ACCC noted that No. 4 player ANZ had argued in its takeover submission that it had experienced a “decline in market share in home loans, retail deposits” and small-and-medium business lending.

Buying Suncorp’s bank would provide it with immediate growth, but without the deal ANZ “may be incentivised to compete more vigorously to attract customers than it does currently and thereby increase its market share in the relevant markets,” the ACCC said.

The ACCC will make its final decision by June 12 on the deal, which also requires approvals from the Queensland government and Australia’s federal treasurer.

ANZ said last year that buying Suncorp’s banking arm would boost its mortgage book by A$47 billion to A$307 billion and help it reclaim market share lost to its main competitors.

($1 = 1.4738 Australian dollars)

(Reporting by Scott Murdoch and Byron Kaye; editing by Jamie Freed)