Westpac Banking Corporation recently announced its intention to conduct a Share Purchase Plan (SPP) to provide eligible shareholders with an opportunity to purchase up to $30,000 worth of shares without incurring brokerage or other transaction costs. Westpac is targeting to raise approximately $500 million under the SPP with the intention of further strengthening the bank’s balance sheet, supporting customer growth and providing the business with an increased buffer above the Australian Prudential Regulation Authority’s (“APRA”) common equity tier 1 (CET1) capital ratio benchmark of 10.5%.
Under the SPP, shareholders as of the Record Date (1 November 2019) have the opportunity to increase their holding of ordinary fully paid shares in Westpac at the lower of the issue price paid by institutional investors under the Placement, being $25.32 per share, and a 2% discount to the volume weighted average price of shares traded during the five ASX trading days immediately prior to and including the Closing Date (expected to be 2 December 2019). Eligible shareholders have the ability to apply for SPP shares in parcels with a dollar value of $1,000, $2,500, $5,000, $10,000, $15,000, $20,000, $25,000 or $30,000 (subject to discretionary scale back by Westpac).
What is the Issue Price of the SPP Shares?
As noted above, SPP Shares are offered at the lower of:
- $25.32, being the same price paid by institutional investors under the Placement; and
- a 2% discount to the volume weighted average price of shares traded during the five ASX trading days immediately prior to and including the Closing Date (expected to be 2 December 2019)
The SPP opened on 12 November 2019 and closes at 5.00pm on 2 December 2019. The SPP offer is non-renounceable, which means you cannot transfer the rights to a third party. Shares issued under the SPP will rank equally in all aspects with existing shares quoted on the ASX.
Our independent third-party research provider Morningstar remains constructive on Westpac with an estimated fair value of $29 per share. Despite numerous headwinds such as lower cash rates, the transition from interest-only to principal and interest loans, and heightened competition in a low credit growth environment, Morningstar is of the view that the business overall is being managed well and as such, recommend that shareholders should subscribe to the SPP given the placement price is at an attractive discount to their fair value estimates.
If you have any further queries in relation to the SPP and wish to discuss any matters in relation to your holding, please feel free to contact a member of our Wealth Management team on 03 9810 0700.