j.c. flowers runs its eye over suncorp

PRIVATE equity firm J.C. Flowers, which boasts former Westpac chief executive David Morgan as an operating partner and Australian chairman, has run the numbers on embattled Queensland banking and insurance group Suncorp.

The New York firm has had a "serious look" at Suncorp ahead of new chief executive Patrick Snowball's starting date of September 1, according to senior banking sources.

Analysts have valued Suncorp's banking and wealth management business at between $3billion and $5bn.

It is unclear whether J.C. Flowers' interest is ongoing, but Dr Morgan and his then-Westpac chairman Leon Davis made an informal, $23-a-share pitch for Suncorp in June 2006.

The approach was controversially rebuffed by Suncorp chairman John Story without being referred to shareholders.

Instead, Suncorp proceeded to buy rival insurer Promina in October for $7.9bn.

Dr Morgan, who attended a BHP Billiton board meeting this week, was unavailable for comment on J.C. Flowers, and a Suncorp spokesman said yesterday the group did not comment on speculation about "potential bids or related matters".

ANZ Bank chief executive Mike Smith showed no such reticence, re-entering the Suncorp fray in a lunch address to the Australian-British Chamber of Commerce in Sydney.

Asked about his interest in Suncorp's banking assets, for which he launched a low-ball bid in September last year, Mr Smith said competition regulator Graeme Samuel had "already said that he would not like to see that happen".

"There's a need for the regional banks; they fulfil a useful function in the financial system, and it would be a shame if they were to go," Mr Smith said.

"I would never say never, but it's not on my radar right now."

Suncorp's overpriced acquisition of Promina compounded the problems from its aggressive lending to the commercial property sector and big business, which resulted in the group adopting a good bank/bad bank structure earlier this year.

In the past three successive half-year periods, the group has suffered a flood of claims from catastrophic weather events.

As a result, the banking operations have been starved of the usual surplus of capital thrown up by the insurance business. A senior banker said yesterday J.C. Flowers had previously shown interest in the Australian banking sector.

"But they'd have issues with the Foreign Investment Review Board in relation to the big four," the banker said.

"The regionals are a possible play for them, but the difficult part would be the exit strategy."

J.C. Flowers has shown keen interest in institutions weakened by the financial crisis or poor loan books.

In the chaotic events surrounding the September weekend that claimed US investment bank Lehman Brothers, the firm considered investments not only in Lehman but also Merrill Lynch and insurer AIG.

It passed on all of them, but currently has major investments in the failed Long Term Credit Bank of Japan, now Shinsei Bank, the German real estate investor Hypo in partnership with a Chinese sovereign wealth fund, and most recently the failed IndyMac Federal Bank.

Source:http://www.theaustralian.news.com.au/business/story/0,28124,25888970-643,00.html

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