Key points:
- Sale of Landmark Financial Services $2.4 billion loan book and $300 million debenture book to ANZ
- Exclusive relationship with ANZ for Landmark to refer any customers who may be interested in acquiring financial services products to ANZ. Landmark’s insurance business not impacted
- Approximately $2.1 billion debt reduction for AWB Limited balance sheet on closing
- Cash released to AWB expected to be approximately $155 million with the potential for an additional $13 million over time
- Expansion of competitive product offering for Landmark Financial Services customers
- Estimated annualised pre-tax earnings reduction of $5 million to $10 million as a result of the transaction and referral relationship
- One-off loss on sale and restructuring costs of approximately $62 pre-tax million to be accounted for in financial year ended 30 September 2010
AWB Limited today announced the sale of Landmark Financial Services’ $2.4 billion loan book and $300 million debenture book to ANZ. In conjunction with the sale of assets, Landmark has entered into an exclusive referral relationship with ANZ.
The sale of the loan and debenture books is subject to receiving relevant regulatory approvals from the Australian Competition and Consumer Commission and Australian Prudential Regulation Authority. The sale is expected to close early 2010.
AWB Managing Director Gordon Davis said in working to achieve our corporate objectives of a streamlined debt profile and simpler lower risk business, AWB has been reviewing the Landmark Financial Services lending business model.
“The completion of this transaction contributes significantly to the achievement of these corporate objectives as it simplifies the business and enables AWB to significantly reduce its level of debt,” Mr Davis said.
“We look forward to a successful relationship with ANZ as we continue to deliver outstanding service to Australia’s rural and agricultural community,” Mr Davis said.
Exclusive referral relationship with ANZ
In addition to the sale of Landmark’s loan and debenture books, Landmark has also entered into an exclusive relationship with ANZ for Landmark to refer any customers who may be interested in acquiring financial services products to ANZ. The initial term of the relationship will be three years.
As part of this relationship, the vast majority of Landmark Financial Services employees will be offered employment with ANZ, which ensures customers continue to deal with the committed financial services team they have come to trust.
Under the relationship Landmark will earn a fee on all loan referrals of Landmark customers as well as a trail fee on existing loans and all future loans referred via the relationship.
Landmark Managing Director Graeme Jacobs said for Landmark customers it will be business as usual.
“This relationship is between two organisations committed to the best possible service of Australia’s rural and agricultural community,” Mr Jacobs said.
“This arrangement is similar to the successful alliances we have with insurance providers which enables us to facilitate quality insurance products to rural Australia. The transaction does not affect Landmark’s successful insurance business.
“I am proud of the success we have had in our Financial Services business however believe that our customers will be better served by Landmark aligning itself with a financial institution which has the ability to provide a broader suite of products at competitive rates,” Mr Jacobs said.
Financial impact
Upon completion of the sale, AWB’s balance sheet will be simplified and gearing reduced with approximately $2.1 billion of debt associated with the loan book to be repaid plus approximately $155 million of capital will be released. In addition, there is the potential to release a further $13 million, depending on the performance of specific loans over time. The final amount will vary depending on movements in the loan book between signing and completion.
Upon completion of the sale, current earnings associated with the loan and debenture books will be replaced in part by earnings under the relationship with ANZ including referral and trail fees and earnings from the release of capital.
As a result of the transaction and referral relationship, there will be an estimated annualised pre-tax earnings reduction of $5 million to $10 million on a full year pro-forma basis. However, this transaction immediately improves the risk adjusted return on capital for the group by releasing capital currently generating low returns.
AWB will book a $62 million pre-tax significant item for restructuring costs and write-off on the lending book in the financial year ending 30 September 2010.
For further information:
Peter McBride
GM Corporate Affairs
Tel: (03) 9209 2174
Mob: 0417 662 451 |
Belinda Seal
Investor Relations Manager
Tel: (03) 9209 2887
Mob: 0438 535 975 |
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