Dear Shareholder
MyState Limited announce a Scheme of Arrangement with The Rock Building Society Limited
MyState Limited (MyState) and The Rock Building Society Limited (The Rock) today announced that they have entered into a Scheme Implementation Deed (SID) whereby it is proposed that the two companies will merge by way of a scheme of arrangement (Scheme).
The proposed Scheme follows the successful merger of MyState Financial and Tasmanian Perpetual Trustees in 2009 to create MyState. It also follows a period of considerable consolidation in the banking industry in Australia in recent years and realises the ambitions of MyState to expand operations to regional centres nationally.
The MyState Board, and that of The Rock, unanimously agrees to support the transaction which will, when fulfilled, create one of Australia’s leading listed community-focused financial services groups.
The proposed Scheme is anticipated to be implemented by December 2011, subject to the approval of The Rock’s shareholders, certain regulatory and other approvals, and the fulfilment of certain conditions. Under the scheme, The Rock will become a wholly owned subsidiary of MyState Limited, which will continue to be headquartered in Tasmania. Under the Corporations Act, you are not required to vote on this proposal.
The proposed merger is a natural fit for our organisation and will yield substantial strategic benefits including, but not limited to:
• immediately accessible efficiency gains and cost savings;
• enhanced distribution, with MyState able to access The Rock s extensive national presence in the broker channel;
• geographic and balance sheet diversification, with the potential for further benefits such as reduced funding costs;
• increased distribution opportunities for MyState s wealth and trustee administration capabilities as well as imminent business banking and agribusiness offerings;
• potential technology efficiencies; and
• improved growth opportunities for the Merged Entity over the near to medium term.
More broadly, the Scheme is expected to result in a range of benefits for you, our shareholders, our customers and our employees including:
• shareholders of MyState are expected to benefit from improved operational efficiency as a result of the anticipated synergies
• MyState customers can anticipate funding benefits derived from an increase in the size of the balance sheet in addition to opportunities to bring forward improvements in IT systems, including enhanced online and mobile capabilities
• employees of MyState are expected to benefit from enhanced employment prospects and wider opportunities within the Merged Entity
We anticipate that the proposed Scheme will result in pre-tax net synergies in the order of $7.5 million to $8.5 million per annum by year three and that the transaction will be earnings per share (EPS) accretive for MyState on an NPAT and cash basis in the first full year (excluding one-off transaction costs). The transaction is anticipated to be strongly accretive by year three.
Under the terms of the proposed Scheme, The Rock s shareholders will receive 7.75 MyState shares for every 10 shares in The Rock. If the proposed Scheme is approved, The Rock and MyState shareholders will own approximately 22% and 78% of the Merged Entity respectively.
The Merged Entity will have:
• an estimated combined market capitalisation of $282m based on the last sale prices of The Rock and MyState shares;
• combined loans of $2.85bn and combined deposits of $2.24b1;
• a network of 24 branches and 20 mini branches and approximately 530 employees1;
• funds under management and advice of $1.68bn1.
To ensure that you benefit from the performance of the MyState Limited leading up to the implementation of the Scheme, the MyState Board propose to bring forward the record date for our interim dividends, with these dividends intended to be paid shortly following implementation of the proposed Scheme. However, this dividend payment will not depend on a successful implementation of the Scheme.
Complete and detailed information regarding the proposed merger is available on our website www.mystatelimited.com.au
I will continue as Chairman of MyState and Stephen Lonie, currently Chairman of The Rock, will be invited to join the MyState Board as a non-executive director. The Merged Entity s executive team will continue to be led by the current Managing Director of MyState, John Gilbert. The Rock s Managing Director, Stuart McDonald, will not continue in a role as part of the Merged Entity.
The Board of MyState Limited believes that the transaction not only delivers positive shareholder value but a truly compelling future growth opportunity for a proudly owned and operated Tasmanian business and I am glad to share this news with you.
Yours sincerely,
Dr Michael Vertigan AC
Chairman
MyState Limited
1 Based on results as at 30 June 2011
