ASX Announcement - National Australia Bank Sells Michigan National To ABN AMRO For $5.29 Billion - 23 November 2000
National Australia Bank announced today it had agreed to sell Michigan National Corporation in the United States to ABN AMRO for US$2.75 billion (A$5.29 billion at an exchange rate of A$1=US$0.52) in cash.
The sale will result in an estimated gain to the National of US$1.1 billion (A$2.1 billion) after adjusting for dividends, tax and expenses.
The National will also have the right to a dividend of US$85 million in respect of Year-end 2000 profits.
As well, it will retain the profits earned by Michigan National up to the time the sale is expected to be completed on March 31, 2001.
The sale price represents a multiple of 15.5 times 2000 actual earnings (excluding goodwill and abnormals) and 3.2 times net tangible assets (including dividend).
With the conclusion of the transaction, the post capital gains tax internal rate of return from the National's investment in Michigan National will be 39 per cent.
The return in US dollar terms of 28 per cent a year has exceeded the United States Regional Bank Accumulation Index for the same period (ie 22 per cent) on a notional tax basis.
Frank Cicutto, Managing Director and Chief Executive Officer of the National, said the transaction was an excellent outcome for the National, Michigan National and ABN AMRO.
"We are very pleased about the price and other terms we have agreed with ABN AMR0. They are consistent with our focus on shareholder value.
"Equally, ABN AMRO is acquiring a first class banking operation with an attractive franchise that will complement its existing presence in Michigan.
"Michigan National's performance since our acquisition in 1995 has exceeded expectations. We believe ABN AMRO will provide the scale to enable Michigan National to capitalise on its potential and the opportunities in its markets," Mr Cicutto said.
In commenting on the use of the funds the National had gained from the transaction, Mr Cicutto said they would be deployed to enhance a number of the Croup's existing operations.
"We will set aside an amount to further develop our organic growth opportunities in the United Kingdom. That will include acceleration of our wealth management and relationship management platforms together with enhancements to our distribution network.
"We will also use part of the proceeds to accelerate the use of digital technology throughout our Group.
"We are a shareholder focussed organisation. We are committed to active capital management.
"If we do not have attractive, value-adding opportunities to strengthen our various franchises, then this sale opens up the opportunity for capital initiatives to enhance the return on shareholders' funds," Mr Cicutto said.
Michigan National Corporation is the third largest bank holding company in the State of Michigan and the 68th largest in the United States in terms of total assets as of June 30, 2000. At September 30, 2000, Michigan National Corporation's total assets were A$16 billion.
At September 30, 2000, Michigan National Bank, Michigan Corporation's principal subsidiary, operated through 185 outlets (including 26 new concept centers focusing on investments and 31 in-store financial services centers) and 332 ATMs across Michigan.
The Netherlands-based ABN AMR0 Bank is one of the world's largest banks. In North America ABN AMRO is headquartered in Chicago and its subsidiaries include LaSalle Bank in Chicago and Standard Federal Bank in Michigan.
Consistent With National's Core Strategies
The sale of Michigan National is consistent with the National's intention to manage each of its businesses "to create maximum shareholder value", Mr Cicutto said.
"During the past 12 months the National has reviewed the current performance, strategic positioning and investment needs of its key franchises and refined its core growth strategies.
"We want to build businesses that rely on out relationship management strengths, particularly in the premium and private segments of the retail market and the small and medium segments of the business market.
"We also want to accelerate the growth of selected businesses capable of achieving scale across different geographies.
"To achieve this we need to ensure critical mass in our various businesses.
"To gain the scale required for retail and business banking operations in the United States would have necessitated major investment.
"While acknowledging the value we have already obtained from Michigan, we believe it would be more beneficial for us to concentrate our growth efforts elsewhere," Mr Cicutto said.
He added the National will continue to employ a strategy of active capital management.
The sale of Michigan National will have no impact on the National's other investments in the United States.
"We will retain a substantial presence in the United States via our investment in HomeSide, which offers important growth opportunities both in its massive domestic market, and selected international markets.
"We will also maintain our successful Wholesale Financial Services operation in New York," Mr Cicutto said.
Note for Editors
About the National Australia Bank Group
The National Group is an international financial services group providing a comprehensive and integrated range of financial services across four continents and 15 countries. Globally, as at September 30, 2000 the National had:
* Total balances heat assets of A$344 billion
* Over A$60 billion in assets under management and administration
* A mortgage servicing portfolio in excess of A$350 billion
* More than 12 million customers
The National is the largest financial services institution listed on the Australian Stock Exchange and was the 22nd largest financial services company in the world by profitability and 34th by revenues (Fortune 500, July 2000).