Westpac has unveiled its generous $18 billion scrip bid for St George Bank in a deal which sets all sorts of hares running and creates a series of somewhat unfortunate precedents.

The first is the probity question of a CEO being poached and then launching a takeover bid for her old company while also directly profiting from the deal.

When she left St George, Gail Kelly had built up a shareholding of 1.16 million shares worth almost $40 million, based on the Westpac bid. Rather than selling these shares and copping a huge capital gains tax, she can just swap them tax free into 1.52 million Westpac shares as part of the 1.31 shares for one offer.

When Gail Kelly departed for Westpac last August it was all very friendly. She quit the St George board in August but remained an employee until February 1, the day she started with Westpac.

If the game plan wasn’t to buy her old bank, why did she hang on to those shares? It is not a good look to have a bigger shareholding in a competitor than your own company, and it leads to the perception that perhaps the plan was always to bring the two together.

The banking industry and the shareholding community will no doubt love this deal because it means more profits and lower costs, but stand by for the Finance Sector Union to use all its Labor Party connections to stop a deal that will probably see about 10% of the combined 37,000 staff axed over time. This puts the broader labour movement in a difficult position because they wants to simultaneously protect jobs whilst also maximising the $1.2 trillion in Australia’s mandated superannuation system.

The only stakeholder group without a political voice is Australia’s impotent consumer movement.

I’ve done about eight TV radio and interviews bagging this deal so far and we’re yet to see a single politician of any colour put their head up. I’m meant to be a shareholder activist. Where are the consumer activists?

Choice is doing a little better with former TV journalist Chrstopher Zinn as its mouthpiece, but the Australian Consumers’ Association remains pretty weak and it is at moments like these that we really need them.

The market has spoken in volumes about this deal. Despite offering what looks like an excessively generous premium, Westpac shares have only slipped 2% or 57c to $25.40, whilst St George has surged 6.82 to $33.47, lifting its market cap by 3.82 billion almost $18 billion in one morning.

The surge in the value of the combined businesses plus all other banks speaks volumes about how lucrative this deal will be for the cartel if Wayne Swan doesn’t step it and do the right thing by consumers.

Today’s Mayne Report video rips into the ASX’s treatment of Melbourne.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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