07/05/2009 - 12:08

Elders nets $34m from bank share sale

07/05/2009 - 12:08

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Elders Rural Bank is set to change its name as Elders, formerly Futuris, sells 10 per cent of its stake to Bendigo and Adelaide Bank for $34 million.

Elders nets $34m from bank share sale

Elders Rural Bank is set to change its name as Elders, formerly Futuris, sells 10 per cent of its stake to Bendigo and Adelaide Bank for $34 million.

Starting from July 1, Elders Rural Bank (ERB) will be rebranded as Rural Bank to better reflect the change in ownership and strategy to broaden its business.

The name change coincides with a deal struck between Elders and Bendigo, where the latter will increase its stake in ERB from 50 per cent to 60 per cent.

Bendigo said it agreed to buy a 10 per cent stake from Elders for $33.9 million. The sale is subject to regulatory approvals.

Following completion of the transaction, Elders will retain a 40 per cent shareholding in ERB.

ERB managing director Paul Hutchinson stressed today the changes will not impact existing ERB customers.

"Except for the change in name to Rural Bank, our clients will be accessing the same products from the same people from the same Bank," he said.

"The existing bank management and sales force will remain in place, albeit with some revised reporting lines and employment of senior regional sales management."

He added that ERB has forecast its full year net profit to be better than the prior year's result.

At the end of the 2008 calendar year, ERB operations included loans of $3.7 billion, deposits of $4 billion with retail deposits representing over 90 per cent of its funding based.

 

 

ERB and Elders' announcements are below:

 

ERB

Key points

- Bendigo and Adelaide Bank increases ownership of Elders Rural Bank (ERB) from 50% to 60%
- Elders Limited will retain a 40% interest in ERB
- ERB will be rebranded Rural Bank Limited, which is consistent with the change in ownership and strategy to broaden its business
- ERB will continue to distribute products through the Elders and Bendigo Bank branch networks.

Effective from 1 July 2009, Elders Rural Bank (ERB) will change its name to Rural Bank Limited. The Managing Director of ERB, Paul Hutchinson said the establishment of an independent brand would support the Bank's growth plans.

"It marks the evolution of ERB where it has grown to the point where it can take on a more independent identity and pursue additional growth plans through broadening our distribution platform and customer base," Mr Hutchinson said.

Notwithstanding the change in brand, Elders will continue to be an important element in the Bank's strategy.

"ERB will continue to distribute banking products and services throughout the Elders network and the special relationship that exists between our two companies will continue," Mr Hutchinson said.

The change in brand coincides with the announcement today that Bendigo and Adelaide Bank (BEN) plans to acquire an additional 10 per cent stake in ERB. The purchase will take BEN's ownership to 60pc with the remaining 40pc held by Elders Limited. The share transaction is subject to regulatory approval1.

BEN Group Managing Director, Rob Hunt said today's announcement was a further indication of BEN's commitment to providing a real alternative banking option - particularly in rural and regional Australia.

"Through Elders Rural Bank's comprehensive network of staff who live in rural and regional communities, we continue to work closely with our customer base and strive to provide them with the products and services needed to meet their unique financial requirements," Mr Hunt said.

Elders Limited Managing Director, Malcolm Jackman noted the outstanding performance and growth of the Bank.

"It is appropriate for the bank to now present a greater level of independence from Elders as it continues to expandits client base throughout Australian rural and regional communities," Mr Jackman said.

"Elders Rural Bank has been an unqualified success story for its owners and its clients. The identification with Elders was a critical ingredient in its acceptance by the rural sector from day one.

"Now, with the bank well established and recognised, it is no longer necessary for Elders to maintain a 50% shareholding and the release of capital from the reduction to our interest will advance our Agenda for Change objectives".

Mr Hutchinson said there would be no impact for existing ERB customers.

"Except for the change in name to Rural Bank, our clients will be accessing the same products from the same people from the same Bank," Mr Hutchinson said.

"The existing bank management and sales force will remain in place, albeit with some revised reporting lines and employment of senior regional sales management."

Mr Hutchinson also provided an update on the financial performance of the Bank. "ERB is currently forecasting the full year profit to be an improvement on the prior year. Our funding position remains very strong with continuing solid growth in retail deposits, which represents more than 90% of funding requirements. Furthermore credit metrics are sound and the outlook for the rural sector remains generally positive." Mr Hutchinson said.

 

 

ELDERS

Elders Limited (Elders. ASX ELD) today announced an equity restructure and management and branding changes in Elders Rural Bank ("the bank"), which will see the bank assume greater autonomy as a specialist bank for Australian rural producers.

Under the restructuring:

- Elders will reduce its shareholding in the bank to 40% through the sale of a 10% shareholding at book value to fellow shareholder Bendigo and Adelaide Bank Limited, whose stake will rise to 60%.

- the bank will be rebranded as Rural Bank from 1 July 2009, consistent with the change in equity, and be companion branded with Elders.

- Senior head office and regional distribution management currently employed by Elders will transfer to employment within Rural Bank.

- Elders will continue to distribute Rural Bank products through the Elders network.

The equity restructuring is subject to regulatory approval including by the Treasurer under the Financial Sector (Shareholdings) Act 1998).

Elders Chief Executive Malcolm Jackman said that the agreement recognised the bank's growth and the changes needed to facilitate the next stage of its development. "Elders Rural Bank has been an unqualified success story for its owners and its clients. The identification with Elders was a critical ingredient in its acceptance by the rural sector from Day One."

"Now, the bank is well established and recognised and it is no longer necessary for Elders to maintain a 50% shareholding. ERB has grown to the point where it can, and should, take on a more independent identity to enable it to pursue its growth plans.

"While a 50% shareholding is no longer the optimal position for Elders, we will be continuing to be a major shareholder so that we can maintain exposure to the Bank's strong growth prospects" said Malcolm Jackman.

Malcolm Jackman said that the restructuring would not bring any changes for Elders clients. "For our clients, the restructuring will be barely noticeable, except for the change in name from Elders Rural Bank to Rural Bank. As far as clients are concerned, they will be accessing the same products from the same bank, delivered by the same people".

"Elders will continue to distribute the Rural Bank products which are an important part of our product offering to rural and regional Australia. The existing management and sales personnel will remain in place, albeit with revised reporting lines and employment for senior and regional management."

Elders Rural Bank operations at 31 December 2008 included loans of $3.7 billion, deposits of $4.0 billion with retail deposits representing over 90% of its funding base.

The 10% sell down of Elders' interest in the bank will realise capital of $33.9 million.

The sale will take effect from 8 May 2009, subject to regulatory approval. Board representation is unchanged. Distribution services provided by Elders will continue under the existing agreement.

Mr Jackman said that the capital released by the restructuring would be used to advance the Company's Agenda for Change objectives of a stronger balance sheet and reinvestment in core businesses.

"The restructuring enables us to release and redeploy capital whilst retaining a 40% interest in, and product distribution rights from, a banking operation which has first-rate performance and outstanding prospects "said Malcolm Jackman.

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