Colonial buy to save CBA $300 million
The proposed takeover of Colonial by the Commonwealth Bank will cost $447 million and lead to cost savings of up to $300 million per year, according to the scheme of arrangement docu-ments.
The proposed takeover of Colonial by the Commonwealth Bank will cost $447 million and lead to cost savings of up to $300 million per year, according to the scheme of arrangement docu-ments.
Cost savings are expected to be generated through the merging of back-office and corporate cen-tre functions, distribution savings in the banking business and integration of information tech-nology. The majority of the cost savings are expected to be achieved by the end of the second year of the merger.
CBA estimates about 250 "overlapping" branches would be able to be amalgamated into single sites. CBA has given assurances that where a branch from either organisation is the only bank in a country town, the branch would be retained for at least the next five years.
Job cuts were expected to be between 2,500 and 2,750 over the two years following completion of the merger, with natural attrition and voluntary redundancy expected to keep sackings to a minimum.
Revenue synergies are expected from increased cross-selling of Colonial products to existing CBA customers and increased sales performance from added expertise in life insurance and funds management.
One-off costs associated with the merger include systems integration, branch amalgamation, marketing, training and redundancy costs, and transaction costs of $135 million. The merger is expected to cost $447 million before tax, with the majority of costs expected in the first year.
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