Scottish bankers must be smiling

SCOTS never joke about money, but there must be a few smiles in the boardroom of the Bank of Scotland thanks to the rise-and-rise of the BankWest share price.

After touching a 12-month low of $3.41 last October, the local finance favourite has hit a high of $4.10, with 50c piled on since April, equivalent to a 15 per cent rise in a matter of weeks.

The question hanging from the share price rise is whether investors have re-discovered a largely forgotten regional bank, or whether there is some truth in growing speculation of an imminent takeover bid for BankWest, with Wesfarmers repeatedly named as the most likely suspect.

If the takeover theory is correct, then the Bank of Scotland will be a very willing seller, having tried for more than a year to offload its 55 per cent stake in BankWest – with an embarrassing lack of interest.

Never mind. The latest increase in BankWest’s share price represents a gain for the Scots of about $150 million, as believers in the takeover theory push the BankWest price ever higher.

Wesfarmers, naturally, will not comment on whether it has an interest in BankWest. However, it would not be surprising if, over the past few years, it has not joined with other potential suitors and run a ruler over BankWest. All rival banks that have taken a look have walked away muttering that it’s too small, too regional or too difficult because of trade practices problems.

Wesfarmers, however, might be different – though Briefcase admits that when the idea was first floated it was rejected as highly unlikely. Why would Wesfarmers want even more exposure to the highly cyclical WA economy?

According to some smart-money operators, Wesfarmers could have spotted a way to generate value in two of its other operations by acquiring a bank.

The most obvious initial gain could come from plugging BankWest directly into Landmark, the old Dalgety business, which has a long history of lending to farmers.

The second gain could come from injecting Gresham Partners, Wesfarmers 50 per cent-owned merchant banking business into BankWest. Gresham has been a highly successful business during the past five years but is condemned to being a fringe player unless it can get access to a bigger balance sheet.

BankWest, on the other hand, totally lacks any merchant banking prowess and lacks credibility among Australia’s financial dealmakers.

The management team at Gresham would leave conventional banking business to the grey cardigan brigade while injecting much-needed spark into the entrepreneurial side of the bank.

In theory, everyone is a winner. BankWest gets a new lease of life; Gresham gets to deal off a stronger balance sheet; Wesfarmers liberates the value locked in its unlisted stake in Gresham; and BankWest shareholders, who stick with the stock after the takeover, should enjoy an even stronger share price.

The old enemy makes moves in to WA

THE late (but still legendary) British financier, Tony Rowland, might also be smiling at the way a company he once ran is tipping money into WA.

Lonmin PLC, part of the old Lonrho group, last month revealed plans to invest up to $52 million in Platinum Australia, an exploration company looking for platinum in the north of the State.

The deal followed an early decision to invest in Helix Resources, which is also on the platinum hunt in WA.

A lifetime ago (well, 12 years actually), Rowland commissioned an infamous report on his arch-enemy, Alan Bond.

It was that document, with the devastating finding that Bond Corporation was technically insolvent, which did more than anything else to bring down the house of Bond, and cause a decade of trouble for WA.

History has turned full circle. Lonmin, the western world’s third biggest platinum producer, has returned to the place so effectively rubbished by its former chairman, not to continue the rubbishing, but to inject a spare $50 million, and more.

Money, obviously, has no memory.

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