HBOS bids to buy up all of BankWest

The UK's fifth largest banking group, HBOS, put forward a 1.04bn Australian dollar bid to buy the remaining share of its part-owned Bank of Western Australia yesterday.

The plan to buy the 43 per cent of the regional high street bank that HBOS does not already own has been seen as a precursor to the sale of the whole unit.

HBOS said it would offer A$4.25 a share in cash for the rest of BankWest, which has been struggling with bad loans. The offer values the Perth-based BankWest, Australia's seventh largest, at A$2.4bn.

"There is limited strategic sense for a northern hemisphere-based bank to be buying assets in Western Australia," John-Paul Crutchley, an analyst at Merrill Lynch, said. "I cannot see the rationale for HBOS holding on to the bank and I would be very surprised if HBOS had a long-term strategic interest in it."

Bank of Scotland, which merged with the mortgage lender Halifax to form HBOS in 2001, bought BankWest from the Western Australian state government in 1995 and then floated 49 per cent of the company. It now owns 57 per cent. HBOS has tried to sell BankWest in the past. St George Bank scrapped talks to buy the company for A$2.4bn in 2001.

HBOS said the decision to buy all of BankWest was based on wanting to maximise its investment in the business. A spokesman for the company said: "To maximise its potential, we believe there is a need for further support from the HBOS group, which we were reluctant to do as a partial shareholder."

The deal would be paid for through the company's existing capital resources and the bank would become a fully owned subsidiary of the HBOS group.

Ian Mackenzie, the chairman of BankWest, called the approach a "constructive step" in defining HBOS's relationship with the company. But the BankWest board advised shareholders yesterday to take no action on the offer.

BankWest made a pre-tax profit of A$156m in 2002, which fell below expectations.

BankWest shares floated at A$2.40 in 1995 and fell to a four-year low of A$3.20 in March. Yesterday, they closed up 19 per cent at A$4.38, exceeding the offer price by 13 cents, but it is thought unlikely that HBOS would raise its price.