Australian banking major Westpac Group has decided to sell its Pacific businesses to Kina Securities (Kina Bank) for up to A$420m ($310m).
Westpac Pacific operates commercial banks in Fiji and Papua New Guinea (PNG), creating and distributing deposits, lending, payments, cards, and FX products.
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It also offers services to retail, business and institutional banking customers.
The sale includes offloading Westpac Fiji and Westpac’s 89.91% stake in Westpac Bank PNG.
Under the deal terms, Kina Bank is required to pay A$315m at sale completion and for Westpac PNG, A$60m is to be paid six-monthly over the following 18 months.
The remaining earn-out payments of up to A$45m are scheduled annually over 24 months, post-completion of sale.
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By GlobalDataThese payments are subject to the business performance of Westpac Fiji.
The sale is expected to incur an accounting loss of nearly A$230m as well as a foreign currency translation reserve (FCTR) loss based on exchange rates, post-completion.
Westpac Group CEO of specialist businesses & group strategy Jason Yetton said that the deal is in line with the group’s strategy to focus on its core businesses.
This includes its consumer, business and institutional banking in Australia and New Zealand.
Yetton said: “We are taking another step in becoming a simpler, stronger bank while ensuring a high standard of banking services is maintained for our Pacific customers, as well as providing new opportunities for our people.
“Choosing the right purchaser for our businesses is important to us, our people and the communities we serve. We are pleased our Pacific businesses are being acquired by Kina Bank.
“Kina is a strong brand in the region and is well positioned with deep local knowledge to continue to help our consumer and business customers succeed.”
The deal is pending regulatory and shareholders’ nod, with closing expected in the second half of FY2021.
Recently, Westpac agreed to a court enforceable undertaking with Australian Prudential Regulation Authority (APRA) to improve its risk controls.
