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Presentation To Gloucester CoalLimited

The Nova Team
http://www.ubs.com/


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Agenda
http://www.ubs.com/


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Our Team
http://www.ubs.com/


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Brief Background of the Westpac Offer

Consideration Proposal to exchange 1.25 WBC ordinary shares for each SGB ordinary

share

All-scrip merger

A Scheme of Arrangement (Scheme) is to be effected subject to SGBshareholders vote

Senior management team to be drawn from both banks

SGB Chairman appointed as Deputy Chairman with two other SGB Directorsto join the WBC Board

Operating model for the merged entity is to retain all WBC and SGB brandsand branches/ATM networks

A two-week Exclusivity Period to conduct reciprocal due diligence andnegotiate a Merger Implementation Agreement

Break fee of $100m is proposed

Conditions precedent An Independent Experts Report concluding the Scheme

SGB shareholders vote

Court approval and other regulatory rulings and consents
http://www.ubs.com/


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St. George: Current Position in Market Capitalisation

C u rre n tlyth L a rg e st
http://www.ubs.com/


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Advantages and Disadvantages of Westpac Offer

Advantages Be part of the largest market capitalisation in Australian

banking history Benefit from cheaper cost of funding using WBCs AA

credit rating

Cross-selling opportunities in the largest retail andwealth management network in Australia

Cooperate with Westpac to tackle intense competition inthe regional banking sector

Access to WBCs resources and expertise Accretive EPS for SGB

SGB shareholders obtain CGT rollover relief on the all-scrip merger

Guaranteed SGB representation in senior management

Disadvantages Potential customer attrition

Integration risks involved Staff resistance due to job security issues
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Westpac Offer: Risks Considerations

Customer

Attrition

Issue:

Existing customers leave SGB resulting in shrinkingmarket share and damaging its reputation

Recommendations:

Customer relations management

Media publicity management

Retain SGB branches and ATM networks to maintainpresence

IntegrationRisks

Issues:

Concerns over disruptions to operations during theintegration process

Culture integration issues SGB Big enough but small

enough to be customer-focused

Recommendations:

Appoint transformation advocates from both SGB andWBC

Utilise WBCs market -leading risk management

systems
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Proposed Merged Operations

Opportunities for Growth after merging with WBC Cross-selling to within the wider distribution channel in retail

banking segment

Extension of wealth management segment

More prominent presence in NSW and other states

Product & Operations

Technology

Core/Support

Merged Westpac and St. George Business Model
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How likely is the proposed model to be successful?

Key Features of the Proposed Operating Model

Multi-BrandStrategy

Minimises the risk of the large-scale disruption

Minimises customer and value leakage

Offering a broad range of products

o m m o n trate g icFra m e w o rk

H ig h e r p o ssib ility o f su cce ss in th e in te g ra tio n p ro ce ss B e tte r co n solid a tio n o f p ro d u cts a n d o p e ra tio n s

E a sie r a lig n m e n t of b u sin e ss stru ctu re s

istin ctrandP e rso n a litie s

C ate rin g to a b roa d ran g e of custo m ers

: W estpac ,A professional aspirational bank with a social

conscience . : St George A bank with humanity
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Factors Determining Whether the Merger is Successful

Customers

Customer Attrition Rate Market Share

Customer Satisfaction Index Low

Increase Maintain or Increase

Synergies

Realised Cost Synergies

Realised Revenue Benefits Realised Funding Benefits

Actual Integration Costs

Cost to Income Ratio As Expected or Higher As Expected or Higher

As Expected or Higher As Expected or Lower

Decrease

E m p lo y ee s E m p loy ee Turn ov er R ate

E m p lo y e e S a tisfa ctio n In d e x

M a in ta in o r D e cre a se

M a in ta in o r In cre a seS h areh old ers E arn in g s Pe r Sh a re S h a re Price Pe rfo rm a n ce

In cre a se

B e tte r

e y F a cto rsu c ce ssfu l W h e n
http://www.ubs.com/


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Valuation
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Valuation Summary

:B C O ffe r.2 4 6

:u rre n t S G B.6 6 5
http://www.ubs.com/


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Synergies

Total Benefits: $222 million

Assumptions:

Cost Synergies - 25% ofoperating expenses (Empiricalevidence of 20-30%)

Restructuring Costs- 161.5% ofcost synergies (Average ofprecedent transactions)

Funding Benefits - 48% ofDeposits and other borrowingsat 60 bp (May 2008)

Revenue Synergies - 25% of

SGB revenue $2.3 billionrealised over 10 years.

Who Benefits?

Both St. George and Westpac
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Implied Value

m p lie d V a lu e is N E G A T IV Eon sid erin g S yn erg ies
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EPS vs. Exchange Ratio Analysis

estp ac O fferG B C u rre n t E P S
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Next Steps for St. George
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Alternatives and Impact
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Renegotiate SGB renegotiates terms to benefit SGB stakeholders:

Higher offer price Retention of key SGB senior managementteam

SGB final dividend to be declared to SGBshareholders

No break fee of $100m at the moment Confidentiality Agreement

WBCs Potential Reaction:

Proceed to renegotiate additional terms taking intoconsideration of WBCs maximum offer price

Accept Agree on Merger Implementation Agreement

WBC Offer is communicated to SGB shareholders andprepare for shareholders vote

In the mean time, regulatory and governmentapproval processes are underway

If SGB shareholders vote in favour of the mergerproposition, a Court Approval needs to be obtained

Subsequent to the Court Approval, merger becomesofficial
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Reject SGB continues to grow organically, however, explorealternative funding sources

WBCs Potential Reactions: Offer a higher premium to sweeten the merger deal Abandon the merger proposition entirely Hostile takeover

SGBs Defensive Action: Super-majority shareholder voting

Delay

SGB appoints experts to perform in-depth reviews ofthe merger proposition

WBCs Potential Reactions:

Further negotiations to convince SGB Board If delay too long, WBC may change the WBC Offer orabandon the merger proposition entirely

SGBs Defensive Action: Negotiate for SGB Review Period clause including a

Confidentiality Agreement
http://www.ubs.com/


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Other Matters

Exclusivity Period

Include an exclusivity period of two weeks to conduct reciprocal duediligence and negotiate a Merger Implementation Agreement

Break Fee

Exclude the break fee of $100million as proposed by WBC to allow SGB tohave more optimal alternatives for consideration
http://www.ubs.com/


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Key Messages to St. George Shareholders

WBC Offer

Renegotiate the WBC Offer and additional terms with WBC All scrip-merger

Scheme of Arrangement

Merits of the merger proposition

Benefit from cheaper cost of funding using WBCs AA credit rating

Cross-selling opportunities in the largest retail and wealth managementnetwork in Australia

Outcome of the merger proposition

Accretive EPS

Retain SGB brand and branch/ATM networks

Be part of the largest market capitalisation in Australian banking history
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Other Considerations
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Potential

Biddersfor SGB

Other Big Four Banks CBA, NAB and ANZ may

counter-bid the offer to acquire SGB. This willincrease the premium that WBC has to offer inorder to clinch the deal.

CBA

Huge cash surplus and high share prices

However, facing domestic competition issues

NAB

Previously a major shareholder in SGB

Could make an offer for SGB if it opts to foregooverseas expansion

However, massive capital investment has been

injected overseas

ANZ

Previously a major shareholder in SGB

However, ANZ changed its strategic focus and movedon to expanding in the Asian region
http://www.ubs.com/


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Government

Approval onthe ProposedMerger

Issues:

Possibility of monopoly subsequent to the merger ACCC may view each Australian state as a separate

banking market NSW is the main issue

WBC and SGB, combined, will be the largest amongst allthe Big Four Banks in Australia

The merger would lessen competition in the wealth

management sector possibility of reduced productdiversity for consumers

The state of Australian banking industry

Four Pillars policy maintained

Impacts on national interests

Recommendations:

Merger plan, demonstrating the impacts of the mergeron various aspects, need government approval

Bring in government lobbyists
http://www.ubs.com/


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Final Recommendation

Renegotiate with WBC

Offer price

Retention of key SGB senior management team

SGB final dividend to be declared to SGB shareholders

No break fee of $100m at the moment

Confidentiality Agreement

SGB counter offer Starting price Lowest price

Price per SGB share $34.64 $32.65

Total consideration $19.13billion $18.03billion

Exchange ratio (WBC : SGB)1.33 : 1 1.26 : 1
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Thank you
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http://www.ubs.com/


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Relative Valuation Approach

Average CompanyP/E

CompanyP/NTA

CompanyP/B

$/Share $/Share $/ShareLow 25.24 14.44 14.44

Midpoint 36.06 20.62 20.62

High 46.88 26.81 26.81

Average 25.77

Average TransactionP/E

TransactionP/NTA

TransactionP/B

$/Share $/Share $/Share

Low 24.88 15.12 18.18

Midpoint 35.54 21.60 25.98

High 46.20 28.07 33.77

Average 27.70
http://www.ubs.com/

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