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EXECUTIVE SUMMARY
Mergers and acquisitions are one of the popular topics in business today,
since they characterize the new economy: pressure of global competition,
development of technology and disappearance of country boundaries. The
purpose of this thesis is to study the valuation processes and approaches
in mergers and acquisitions by analyzing the Westpac Banking
Corporation/BT Funds Management case. Discounted Cash Flow and
Comparable Multiples approaches are emphasized in the valuation of the
companies.
Based on the valuation this report will identify the benefits for Westpac
acquiring BT Funds Management.
The report first introduces the general conditions of merging, in the Funds
Management industry recently and admits that there are some limitations
in the report because the merging is going on now and was hard to collect
comprehensive information.
Management Structure at Westpac Introduction
David Morgan, Chief Executive Officer In recent years crashing markets and a stalled
Philip Chronican, Chief Financial economic recovery many financial institutions have
Officer been involved in merging and/or acquiring
David Clarke, Group Executive, BT companies to increase their market value. Recent
Financial Group examples of Mergers & Acquisitions in Australian
Leon Davis, Chairman financial institutions are National Australia Bank
Phil Coffey, Group Executive, Westpac acquiring MLC, Commonwealth Bank acquiring
Institutional Bank Colonial First State and Westpac Banking
Corporation over BT Funds Management;
Rothschild; and Hastings.
ASX Code: POF, since 17/10/2002 The Commercial Bank of Australia Ltd was established
Formerly BT Office Trust (BTO) in Melbourne in 1866 and by 1890 had branches in all
16/10/2002 of the mainland colonies. In 1912, operations were
Grosvenor Trust (GTT) 07/03/1997 expanded to New Zealand, and in 1962, the Bank's
Listing Date:8/04/1993 savings bank activities commenced. Diversification
focused on financing operations with the
Head and Registered Office establishment of General Credits Ltd in 1956, a
Level 15, 2 Chiefly Square Sydney financier engaged in the provision of leasing,
NSW 2000 instalment mortgage and project financing and
Internet: factoring; and C.B.A. Finance Holdings Ltd (51%), a
www.principalofficefund.com.au listed New Zealand public company. Through other
subsidiaries, its operations included unit trust
Auditors: Pricewatehouse Coopers management, travel and nominee services, general
insurance and insurance broking.
Principal Activity
Investment in commercial office
Target Overview – Principle Office Group
buildings in Australia.
The Trust was formed in 1988 as the Aust-Wide
Grosvenor Place Trust by Aust-Wide Management Ltd,
a manager of property trusts, in order to acquire a
30% interest in Grosvenor Place. The Trust initially
consisted of 264 units of $1M cash each and by way
of a 2:1 split was changed to 528 units of $500,000
each in August 1988. The Grosvenor Place interest
was acquired in August 1988 for $243M.Aust-Wide
Management Ltd was placed in receivership in 1992.
Consequently, Aust-Wide Management Ltd resigned
as manager on 06/08/1992, and after Duesburys
Substantial Shareholders Corporate Services Pty Ltd acted as interim manager,
JP Morgan Nominees Australia
Heine Management Ltd was appointed manager on
Limited (10.1%)
30/12/1992.
RBC Global Services Australia
Nominees Pty Ltd (13.7%)
Cogent Nominees Pty Limited (5.5%) In February 1993 unitholders voted to amend the
Queensland Investment Corporation Trust Deed so as to permit the Trust to be listed on
(8.4%) ASX.
AMP Limited (5.8%)
Barclays Global Investors (5.0%) The Trust listed on ASX on 08/04/1993.
Lend Lease Corporation Ltd (5.1%)
National Australia Bank Limited Effective 17 October 2002, the company changed its
Group (7.5%) name and code to Principal Office Fund (POF).
Westpac Banking Corporation (10.9%)
An Acquisition Plan
Strategic Value
The strategic values are both advantageous for BT
and WBC. WBC has been quite keen on gaining
competitive advantage in the wealth and funds
management business. For BT, which has lost both
reputation and performance of its funds in the past
two years. The following are the main reasons
according to CEO David Morgan for the acquisition
of BT Funds Management.
Broaden customer relationships
Improve wealth management position
Drive operational efficiency
Embed a high performance culture
Build corporate reputation