Westpac faces $700 million in merger expenses

Extra $226 million one-off for efficiencies

By Wouter Klijn
Mon 20 Oct 2008

Westpac finds the $19 billion takeover of St George comes with $700 million in costs.

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Westpac faces $700 million in expenses for the takeover of St George Bank, the bank revealed in a statement to the Australian Securities Exchange (ASX) late last week.

"Due to the significant size and non-recurring nature of this transaction, merger expenses that directly impact the profit and loss account will be treated as a cash earnings adjustment for the 2008 full year profit announcement and future reporting periods," the bank said.

In the second half of 2008, Westpac spent $31 million of the $700 million on professional advisory fees, legal fees and salary expenses in relation to the merger.

Of this $31 million, the bank will let $13 million flow through the profit and loss account as a cash earnings adjustment, while the other $18 million will be treated as part of the cost of acquisition and will be reflected in goodwill on completion of the transaction.

Westpac also indicated to take a one-off charge of $226 million after tax for changes it has made to its organisational structure and a review of its capitalised costs.
 
"The expense savings generated by these initiatives are expected to be re-invested in the business in future years."

Westpac will announce its full year results on 30 October.

Shareholders from both Westpac and St George are due to vote on the merger next month.

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