Home Building Society has flagged the possibility of legal action against merger target Police & Nurses Credit Society over changes to the latter’s constitution.
Home Building Society has flagged the possibility of legal action against merger target Police & Nurses Credit Society over changes to the latter’s constitution.
Legal moves would add further hostility to the fight between Western Australia’s two largest non-bank financiers, which traded charges in the lead-up to this week’s meeting of P&N members.
P&N said the changes were designed to stop people becoming members of the society solely for the purpose of benefiting from any demutualisation.
They will create a new class of members that will not be able to benefit from demutualisation for a period of two years.
Home believes the new class of members could block any changes and frustrate the will of the majority of P&N members.
That would make it harder for Home to win support for its proposed merger with P&N, which it plans to put in writing within the next month.
Home chairman Tony Howarth believes P&N members have not been properly informed about the changes.
“I don’t think the members are fully informed as to what the effect of that class of members will be,” Mr Howarth told WA Business News.
“We will look at legal remedies.”
Mr Howarth said he was “completely perplexed” by the constitutional changes which would mean that “one class of members can hold another class to ransom”.
P&N chief executive Fred Huis insisted that P&N members were fully informed about the changes, which he said would not block a fair proposal from proceeding.
Mr Huis said Mr Howarth was trying to create anxiety and mischief among P&N members.
The dispute comes soon after Home completed its merger with StateWest Credit Society.
Mr Howarth’s goal is to build a major WA-based financial institution that will appeal to the parochialism of local customers.
The Home-StateWest merger has created a group with $1.7 billion in loans under management and the addition of P&N would lift the total to $3 billion, making it a much more potent competitor.
There would also be significant scope for operational savings in both head office and across the branch network if a merger proceeded.
Mr Huis said P&N’s board has written to Home confirming its willingness to consider any arrangement put forward.
However, he has also indicated that P&N, as a mutual society, would approach merger negotiations differently to a listed company like Home.
He told WA Business News that his approach was summed up in a statement by Abacus Australian Mutuals, the national association of credit unions and mutual building societies.
Abacus general manager Adrian Lovney said credit unions, as mutuals, are the only financial institutions where members, not shareholders, come first.
“When credit unions and mutual building societies have been taken over or turned into banks in the UK, the higher charges and reduced service have been shown to outweigh the benefits of any payout over time,” Mr Lovney said.
