The Australian Competition and Consumer Commission (ACCC) has released a statement of preliminary views on ANZ Banking Group’s proposed acquisition of Suncorp Group’s banking arm, questioning claims that the transaction would make Suncorp Group a stronger insurer.
“The ACCC’s preliminary view is that it is not clear whether the proposed acquisition would be likely to overall improve the performance of Suncorp Group’s insurance business compared to a future without the proposed acquisition,” the Commission said. “The ACCC is also considering the weight that should be given to any such benefits, noting that the extent to which they might pass through to insurance customers is unclear.”
According to the ACCC, ANZ claimed the acquisition will allow Suncorp Group to run its insurance business more efficiently and effectively, and that public benefits will flow from the transaction. Similarly, Suncorp expects that its insurance business will benefit from a singular focus on growth strategies and investment requirements.
Specifically, according to the statement of preliminary views, Ian Johnston, CEO of Suncorp Group said that divesting Suncorp Bank will allow Suncorp Group to improve its processes and leverage data from sales and underwriting activities which will improve Suncorp Group’s product suite, sales and distribution, customer service and interface, and improve claims processes. Johnston claimed that this will allow Suncorp Group to better meet the needs of its insurance customers by developing more competitive product offerings, delivering more responsive customer engagement, and improve claims processing times.
Regarding Suncorp Group’s claim that it will have better access to sources of funding, the ACCC said Johnston stated that Suncorp’s current market value is a blended average of its various businesses. According to Johnson, this means it is challenging for investors to assess, whereas if the proposed acquisition proceeds, investors will have the option of investing in monoline activities. Johnston stated that the “sale of Suncorp Bank could achieve a rebalancing and rerating with the consequential enhancement of value for shareholders, as well as the capacity to attract capital to support the Suncorp general insurance operations at a higher value”.
However, the ACCC said that Suncorp Group appears to have successfully operated a dual insurance-banking model for many years. “While it is possible that there may be benefits for the Suncorp Group in terms of increased board focus, there are also possible disadvantages, for example the loss of any synergies that result from the combined business,” the commission added.
Responding to the ACCC’s preliminary statement of views, Suncorp Group issued an announcement to the ASX saying that the sale is in the best interests of its customers, employees, shareholders, Queensland, and the nation, and will result in a stronger Australian insurance and banking system. “If the transaction is approved, Suncorp would become a dedicated insurer at a time when the value of insurance to the Trans-Tasman economy and the public has never been greater,” added Suncorp.
Shayne Elliott, Chief Executive Officer of ANZ, said the company will examine the preliminary views in detail and respond to the matters raised.
“When we announced the acquisition, we acknowledged that there would be questions from government and regulators about the competition aspects of this transaction, and we welcomed that scrutiny. We welcome the further community consultation that will now occur,” added Elliott.
Mick Keogh, Deputy Chair of the ACCC, said the Commission welcomes further submissions from stakeholders and consumers on the issues raised. “After we consider submissions from consumers and interested parties, we will conclude our review and expect to announce our decision in mid-June,” he said.
“We are also eager to hear from stakeholders about whether they think the acquisition will have any public benefits.”
The ACCC said it can only grant authorisation if it is satisfied that there is either no likely substantial lessening of competition, or there are likely to be public benefits outweighing any public detriments.
The ACCC’s final decision is scheduled for 12 June. Submissions can be made to the ACCC until 18 April.
ANZ said that in addition to ACCC authorisation, the acquisition is subject to additional conditions including approval from the federal treasurer and Queensland legislative amendments. However, it expects completion to occur in the second half of calendar year 2023.