Bendigo and Adelaide Bank Ltd (ASX:BEN) has struck a $165 million deal to increase its stake in Rural Bank from 60 per cent to 100 per cent ownership.
The final 40 per cent interest in the specialist agribusiness lender Rural Bank has been purchased from Elders Ltd (ASX:ELD) for around 1.2 times Rural Bank's book value.
While the transaction is still subject to regulatory and Elder's financier approval, Bendigo and Adelaide Bank has advised it intends to issue subordinated debt to fund the purchase.
In addition to the purchase price Elders will be paid a special dividend for their share of the current years operating profit up to the settlement date, which is expected to be next month, taking the final value of the deal to around $176 million.
Managing Director Mike Hurst says the business combination will play to the strengths of both companies, allowing Rural Bank to grow with potential for increased penetration of the rural sector.
In the 2010 financial year Rural Bank booked a $55.4 million profit, whereas for the same period Bendigo and Adelaide Bank posted a $259.5 million profit in the year ended on the 30 June 2010.
BEN Price at posting:
$9.03 Sentiment: None Disclosure: Held
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