Kina Securities Limited has entered into sale and purchase agreements to acquire 89.91% of the banking operations in Papua New Guinea and 100% of Fiji, known as the Pacific Businesses, of Westpac Banking Corporation.
The company will outlay up to A$420 million / K1,036 million, including A$60 million payable in three A$20 million six monthly instalments after completion, and up to A$45 million of future earn-outs to be paid annually over the 24 months following completion, subject to business performance hurdles based on actual performance of the Fiji business. Kina has paid a deposit of A$42 million / K110 million upon execution of the Definitive Agreements.
The Acquisition will be funded through a combination of existing cash reserves, cashflow from ordinary operations, retained earnings in the PNG business being paid to Westpac, tier two subordinated debt instruments and potential equity investment from a number of strategic investors.
Kina said it will consider making an offer for the acquisition of the shares held by the remaining shareholders in Westpac Bank PNG Limited post the completion.
The company said the acquisition is a strong strategic fit and alignment with its 2025 strategy to become a leading full service regional bank in the Pacific with a market leading digital platform.
Based on pro forma June 30, 2020 consolidated financials, Kina said the Acquisition is expected to be accretive on completion and will restore earnings per share (EPS) to levels above those prior to the recent capital raising in October 2020.
The integration of Kina and Westpac’s Pacific Businesses is expected to deliver material synergies to be realised in the year ending December 2022.