Bendigo and Adelaide Bank purchasing Victoria’s Rural Finance Corporation for $1.78 billion

Bendigo and Adelaide Bank has agreed to purchase the business and assets of Victoria’s Rural Finance for $1.78 billion as its shares went into a trading halt ahead of a capital raising.

The purchase of Rural Finance Corporation of Victoria was formalised today with the Victorian state government.

Its loan book has an estimated value of approximately $1.695 billion, at the proposed completion date of July 2014.

The acquisition is subject to APRA approval.

The Victorian government, which will release its state budget tomorrow, will receive a net return of around $400 million in the deal. According to Treasurer Michael O’Brien, the proceeds of the sale will be earmarked for productive infrastructure investments in rural and regional Victoria. The decision to sell the Rural Finance Corporation was influenced by the introduction of financial incentives through the Commonwealth asset recycling scheme.

 “The Commonwealth’s financial incentives for the recycling of state assets into productive new infrastructure will further support our record infrastructure investment program,” said O’Brien.

 “We welcome the Commonwealth government’s asset recycling initiative, which has been an influential factor in the decision of the Victorian Coalition government to divest RFC.”

The bank has a presence in 11 locations across Victoria. The new deal will also give Rural Finance Corporation customers access to the bank’s 276 branches state wide.

“Rural Finance will work together with our existing specialist agricultural business, Rural Bank, to serve more than 5,200 farmers across Victoria – with a loan book in excess of $2.4 billion,” Bendigo and Adelaide Bank managing director Mike Hirst said.