Suncorp says merger not to protect it from takeover

SYDNEY - Suncorp-Metway boss John Mulcahy says the company's proposed merger with insurer Promina Group Ltd is not designed to protect it from takeover.

Asked today whether the deal was designed to prevent a third-party offer for Suncorp, Australia's sixth biggest bank, Mr Mulcahy said: "Not at all. We think it's a great transaction for both sets of shareholders."

Under the terms of the agreement, Suncorp is unable to abandon its bid for Promina in the event of a third-party offer for Suncorp.

Mr Mulcahy said he did not accept that such a provision was a so-called "poison pill" and it was a normal contractual requirement for a merger implementation agreement, or MIA.

The two companies are set to merge, to create a A$20 ($23.53) billion diversified financial services company in one of the largest takeovers in Australian corporate history.

Mr Mulcahy declined to comment on whether one of the "big four" banks had ever approached Suncorp, but said that in the 10 days before the deal, when it was clear Suncorp was going to do something, no alternative had come forward.

"People who would have been interested in a takeover of Suncorp would have understood entirely the implications of signing an MIA," he told ABC television.

"We did not have one phone call or approach in that 10-day period."

He said he expected ongoing consolidation in the Australian financial services sector because well-managed scale added value.

Growth would slow down in the general insurance industry, although it would remain profitable, and in such an environment a larger company could have better cost synergies and cope better with margin compression, he said.

Asked about the possibility of a tie-up with St George Bank, Australia's fifth largest bank, Mr Mulcahy said, "That's a long way off, I would think."

"We're focused on completing this transaction, bedding it down, maximising shareholder value as quick as we can."

He said a decline in Suncorp's shares was not a sign that shareholders disapproved of the deal, but rather the result of takeover speculation "coming out".

The merger is awaiting approval from regulators such as the Australian Competition and Consumer Commission (ACCC) and the Australian Prudential Regulatory Authority (APRA).

- AAP