Australia's Westpac bids $17.6 bln for St George

By Miranda Maxwell

SYDNEY (Reuters) - Westpac Banking Corp Ltd (WBC.AX: Quote, Profile, Research, Stock Buzz) launched a $17.6 billion all-share bid for smaller rival St George Bank Ltd (SGB.AX: Quote, Profile, Research, Stock Buzz) in a tie-up that would create Australia's biggest bank by market value.

Analysts said the deal could trigger further consolidation in an Australian banking sector that, while dodging the worst of the subprime crisis, is still grappling with higher funding costs since the onset of the global credit crunch last year.

St George said its board would recommend the A$18.6 billion offer, priced at a 24 percent premium to St George's closing price on Friday.

"It's the type of premium that would have to be offered to be considered seriously," said White Funds Management portfolio manager Angus Gluskie.

Westpac offered 1.31 of its own shares for every St George share, or A$33.10 a share based on the Friday closing prices for both companies, excluding already declared dividends.

The combined entity would have a market capitalisation of around A$66 billion, overtaking Commonwealth Bank of Australia's (CBA.AX: Quote, Profile, Research, Stock Buzz) A$61 billion. It would rank second to National Australia Bank (NAB.AX: Quote, Profile, Research, Stock Buzz) by asset value.

Shares in St George jumped 28 percent to A$34.20 after the announcement. Westpac eased 3.2 percent to A$25.11 in a flat overall market .

Gail Kelly, Westpac's chief executive who joined the bank less than four months ago after heading up St George for nearly six years, noted 2008 had brought a "new world."  Continued...