By Scott Murdoch and Lewis Jackson
SYDNEY (Reuters) -ANZ Group's A$4.9 billion ($3.2 billion) buyout of Suncorp's banking business was cleared by the Australian Competition Tribunal on Tuesday, paving the way for the bank to press on with the takeover of its significant rival.
The ruling came in response to an appeal by ANZ and Suncorp of a decision by the Australian Competition and Consumer Commission (ACCC) that blocked the deal in August on the grounds it would limit competition in Australia's banking sector.
On Tuesday, the Australian Competition Tribunal's deputy president, Justice John Halley, told the Federal Court in Sydney there were sufficient "net public benefits" to allow the deal to go ahead.
He said the proposed deal was unlikely to substantially lessen competition in Australia's home lending market.
ANZ shares closed 2.2% lower, while Suncorp stock ended 6% higher. The S&P/ASX200 finished down 0.08%.
The decision is likely to reignite debate about Australia's merger laws and fuel the ACCC's push for stronger powers and new rules which would make it easier to block deals it sees as anti-competitive. Treasury began a two-year review into merger rules in August.
The takeover still requires approval by Australian Treasurer Jim Chalmers and an official sign-off from the government of Queensland, where Suncorp is based.
If the deal goes ahead, Melbourne-based ANZ, which has trailed its larger rivals in home lending, will be able to grow its loan book at a time when banks are struggling to attract new borrowers after a string of interest rate rises.
"This is a significant milestone and an important step forward in the process, however we still have further conditions to meet," ANZ Chief Executive Shayne Elliott said in a statement. "We remain committed to completing the acquisition as soon as possible once all sale conditions are met."
Chalmers said in a statement he would "carefully and methodically consider whether the proposed acquisition is in the national interest" once the bank sought approval.
FIRST MAJOR LOSS FOR ACCC BOSS
Suncorp Chief Executive Steve Johnston said the decision would allow the diversified financial firm to become a "dedicated Trans-Tasman insurance company" as it pared back its business model.
Selling the bank would reduce capital requirements on Suncorp, and Chairman Christine McLoughlin said any remaining excess capital would be returned to shareholders.
The tribunal's ruling is the first major loss for ACCC chairperson Gina Cass-Gottlieb since she became the competition regulator almost two years ago. The ACT last year backed the ACCC when it turned down an appeal from Telstra (OTC:TLGPY) and TPG on an A$1.8 billion network-sharing deal which the ACCC also rejected.
"Banking markets are critical for many homeowners, businesses and farmers. The ACCC will continue to apply scrutiny to these markets across the breadth of our functions including merger assessments and enforcement investigations," Ms Cass-Gottlieb said in a statement on Tuesday.
The ACCC said last year that allowing the deal to go ahead would "further entrench an oligopoly market structure" in which four lenders, including ANZ, have three quarters of the country's A$2 trillion in home loans.
ANZ, Australia's fourth largest bank by market capitalisation, said when it first announced the Suncorp transaction in 2022 that buying the banking assets would boost its mortgage book by A$47 billion to A$307 billion.
Despite the positive ruling, analysts are questioning whether ANZ buying Suncorp's bank will mean it dramatically increases its home lending market share.
UBS has previously estimated, using December 2023 lending data, that a combined ANZ and Suncorp would become the third-largest home lending and deposit holding bank surpassing rival National Australia Bank (OTC:NABZY)
"To put the size of the acquisition into context, we previously estimated Suncorp Bank profit would add around 5% to ANZ Group's profit. We don't view this as a transformational, make or break type acquisition for ANZ," Morningstar analyst Nathan Zaia told Reuters by email.