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Publish Date : 06-May-2014

Bendigo and Adelaide Bank said that it has agreed to purchase the business and assets of Victoria's Rural Finance for $1.78 billion as its shares entered a trading halt ahead of a capital raising.

The halt was asked to be in force until the begining of trading on May 6 as the bank get ready to issue new ordinary shares. Macquarie Capital will direct the capital raising and Allens is providing legal advice to the lender.

In a statement, Bendigo and Adelaide Bank said it expected to complete the purchase of the business and assets of Rural Finance by July and that it was "committed to maintaining Rural Finance's distinct brand and its presence in 11 locations across Victoria".

Managing director Mike Hirst said in a statement "This transaction brings together two iconic Victorian businesses, both with long and proud histories of serving farmers and communities,".

Bendigo is commissioning a fully underwritten $230 million share placement to chosen institutional investors. The raising's price range is $10.82 to $11.05 per security, representing a 3 to 5 per cent discount to the stock's last close. As well as the placement, the bank's shareholders can participate in a non-underwritten share purchase plan.

The purchase was formalized with the Victorian state government earlier and will comprise all the assets, including Rural Finance's loan book, which has an estimated value of about $1.695 billion.

The purchase is dependent on APRA approval.

Victorian treasurer Michael O'Brien said that the proceeds would be used to pay for rural infrastructure projects such as the $200 million standardization of a rail line from Geelong to Mildura.

He said the sale would qualify for the federal government's promise to grant 15 per cent of the sale price to the state, yielding an extra $60 million for the state, under the infrastructure deal signed by state premiers on Friday.

Mr O'Brien said, "It's a very good business and it's been very well valued by Bendigo and Adelaide Bank".

He said the government received independent advice from JP Morgan not go to the market with the sale, hence the government going through a private treaty.

As one condition of the sale, non-executive employees would retain their jobs for at least 3 years. The funds from the sale has been factored into Tuesday's state budget.

The treasurer said that the sale was part of the state's asset recycling program which also includes the long-term lease of the Port of Melbourne.

Mr O'Brien said that a KPMG study has recommended a medium-term lease, of around 40 years, instead of the previously mooted 99 years, which had valued the asset at around $6 billion. The port which will go to the market in early 2015.

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