Sale of Bankwest

20/9/95

Premier Richard Court today announced that BankWest had been sold to the Bank of Scotland for $900 million.

The Bank of Scotland has undertaken to offer 49 per cent of the shares in a public float with preference to BankWest customers and Western Australians.

Mr Court said that the sale would give a major boost to the State finances and the Western Australian economy.

"The immediate benefit to Western Australians will be a reduction of more than $1 billion in State debt," Mr Court said.

"The long-term economic benefit will be the introduction into the State economy of a major international resources sector financial institution which was voted the world's 4th best energy bank in 1993.

"The specialisation of the Bank of Scotland in the resources sector will add a major new dimension to Western Australia's key area of economic activity particularly in the Asian region.

"The Bank of Scotland is keen to use WA's strength in the resources sector as a springboard into South East Asia which will provide exciting new business and employment opportunities for all Western Australians.

"The 300-year-old Bank of Scotland is also committed to maintaining the BankWest name and existing scale of business including BankWest's extensive branch network.

"This commitment, combined with the fact that the Bank of Scotland has more than $71 billion in assets, will give current BankWest employees a greater level of employment security."

Mr Court said the Bank of Scotland would meet domicile requirements contained in legislation, including that BankWest's head office and place of incorporation remain in WA and the bank's managing director and a majority of the board be resident in the State.  

"The fact that the Bank of Scotland has a track record of delegating responsibility to local management will also ensure that the Western Australian management team is responsive to the needs of the people of this State," Mr Court said.

"This policy, coupled with the 49 per cent float, will ensure BankWest will continue to be a Western Australian bank - but with the added advantage of gaining international strength in an area complementary to the future economic growth of the State."

Mr Court said that the proceeds from the chosen form of privatisation substantially exceeded those expected from a 100 per cent float and the $900 million sale price was higher compared with recent State Bank sales.

The sale of the bank was conditional on the parties obtaining the necessary approvals from the Reserve Bank of Australia, the Bank of England and other regulatory bodies.

The Premier said he was particularly pleased that Western Australians would have the opportunity to contribute to and share in the continued growth, energy and success of the bank by taking up the shares which would be offered to the public.

"Subject to market conditions, it is expected that the shares will be offered to the public within the next six months," Mr Court said.

"The sale of BankWest will substantially enhance the State's financial position - with the sale price representing a multiple of net assets of 1.78 times."

Mr Court said the privatisation would also result in:

+          the repayment of the $100 million in perpetual subordinated debt owed by BankWest to R&I Holdings and the refinancing of the R&I Holdings' $120 million term subordinated debt facility;

+          additional dividends and tax equivalent payments (estimated at $68 million);

+          a payment of an estimated $200 million being received from the Commonwealth to compensate for the State losing its ability to tax the privatised bank when it comes under the Commonwealth tax net;

+          the State's risks under the government guarantee during the phase-out period being substantially reduced; and

+          the State sharing in any improvements in market conditions which may occur through to the time the Bank of Scotland offers 49 per cent of the shares to the public.

"The bank's privatisation will result in a reduction of more than $1 billion in the State's net debt, bringing WA's net debt to GSP ratio down to around 14.8 per cent - almost identical to New South Wales which has a AAA credit rating," Mr Court said.

"The decision to privatise BankWest through the sale of shares to the Bank of Scotland and through a public float is the culmination of an exhaustive process undertaken to obtain the highest possible return for the State, and at the same time satisfy the strict Western Australian domicile conditions of the privatisation legislation passed earlier this year.

"Advertisements were placed internationally for expressions of interest in the sale by tender process and detailed information was forwarded to a number of major financial institutions.

"The approach settled upon by the State Government is an excellent result for Western Australians and I wish the Bank of Scotland and the shareholders every success in further developing this already strong Western Australian bank."