ANZ might be the laggard of the big four, with a market capitalisation of only $60 billion and a residential loan book of just $261 billion going into this proposed Suncorp acquisition.
However, unlike most ASX200 companies, ANZ is also majority owned by its 550,000 retail shareholders who are being asked to stump up more than half of the current $3.5 billion equity raising.
Unlike the dodgy $1.2 billion Carsales capital raising, which I recently criticised in Crikey for failing to compensate the 11,000 out of 19,000 retail shareholders who declined to participate, ANZ has opted to use the so-called PAITREO capital-raising model.
This commendably involves an accelerated pro-rata institutional component completed in just 72 hours, followed by 13 days of trading when retail shareholders can sell their rights to the new shares on market, or wait to be compensated through an auction of the shortfall at the end of the offer.
This retail shortfall auction is scheduled to take place on August 18, but just when you thought ANZ had done everything right, it’s proposed hanging on to the cash for a ridiculous 22 days before making the compensation payment to at least 200,000 non-participating retail shareholders on September 9.
One of the reasons our big four banks collectively make $40 billion in pre-tax profits each year is that they are always quick to pass on new fees or interest rate rises to their customers, but tend to be much slower when it comes to offering relief.
However, ANZ is really pushing into new territory with this proposed 22-day delay with the compensation payment — and this time it is trying to rip off its own small shareholders, rather than customers.
Back in 2015, Westpac, CBA and NAB all did PAITREO capital raisings, and this is the refund timetable for non-participating retail shareholders each announced to the market at the time:
Westpac: $3.5 billion raised overall with $1.9 billion retail component finishing 30% short. The shortfall auction generated $670 million with $92 million of that, or $4 a share, sent to the non-participants. The shortfall auction result was announced on November 17 and the funds were paid seven days later on November 24.
CBA: $5.1 billion raised overall with the $3 billion retail component finishing just 50% subscribed. The shortfall of $1.5 billion cleared at $73.50, returning $2 per share to non-participating retail investors or $42 million overall, which was paid eight days after the September 14 auction outcome announcement.
NAB: $5.5 billion raised overall with the $2.8 billion retail offer 72% subscribed after a healthy $2.04 billion came through the door from small investors. The retail shortfall of 28.5 million shares cleared at $31.60, returning $3.10 per share to non-participating retail investors or $88 million in total. This was paid on June 16, 11 days after the auction outcome announcement.
So there you have it, the other three big banks all managed to transfer compensation cash to hundreds of thousands of non-participating shareholders in fewer than 12 days after the shortfall auction announcement, and ANZ reckons it’s appropriate to hoard the $50 million-plus in compensation cash for a whopping 22 days.
Here’s a prediction: after reading this Crikey story, the ANZ board will leap into action and bring forward the timetable, ensuring it steps back into line and acts just like the other big banks, which happens so often in many other areas of its operation such as interest rate pricing and fee-setting.
Still, we shouldn’t be too critical of ANZ, which deserves credit for delivering the 40th PAITREO capital raising since 2011.
It is certainly a lot fairer than the structures served up by other ASX200 companies, such as the notorious heavily discounted $120 million pro-rata Harvey Norman capital raising in 2014, where there was no compensation for the 70% of retail shareholders who didn’t participate and the entire shortfall went to billionaire controlling shareholder Gerry Harvey personally, as Crikey documented at the time.
The biggest victim in Australia’s anything-goes capital raising system is the retail investor who does nothing — and there were around 8000 victims at Harvey Norman. Sadly, the 11,000 Carsales shareholders who declined to take up $179 million worth of new shares at $17.75 have gifted around $15 million in profits to the unknown clients of underwriters Goldman Sachs and JP Morgan, based on last night’s closing price of $19.30.
Similarly, more than 200,000 ANZ shareholders won’t take up the forthcoming offer to buy one new share for each 15 held at the offer price of $18.90. But starting from today, they have 13 days of rights trading through until August 8 to sell their entitlements on market. And if they don’t do that, they will be compensated through the competitive bookbuild auction of the shortfall at the end, thanks to a conscious decision taken by the ANZ board.
It’s just a shame that these same eight directors are proposing to then take three weeks to forward this compensation cash to their own shareholders. If you’d like to raise a complaint with ANZ about this timetable, try emailing investor relations boss Jill Campbell on firstname.lastname@example.org.
Campbell used to run media and investor relations for the Packer family’s PBL back in the day, almost 20 years ago when Crikey was banned from all PBL-controlled email systems and web servers, so she’s used to the rough and tumble. That ban wasn’t her call, either. The Packers really didn’t like what Glenn Dyer was writing about their empire after leaving Channel Nine in 2004.