In an announcement to the ASX today National Australia Bank Ltd (ASX: NAB) said the IPO of its U.S. banking subsidiary, Great Western Bancorp Inc (NYSE: GWB), will be taking place on October 15 2014 (U.S. time) at a price of US$18 per share.
Although the IPO is fetching a price lower than what was previously expected (between US$21 and US$24 per share), NAB will raise around $US288 million from the sale of 16 million shares in the agribusiness bank. It represents around 27.6% of NAB's ownership.
However the underwriters of the deal – Deutsche Bank and Bank of America Merrill Lynch – have been granted a 30-day option to purchase up to 2.4 million additional shares, in which case the total amount raised would be US$331 million, or 31.8%.
NAB CEO Andrew Thorburn said: "While the price is lower than expectations the IPO had strong demand despite the recent volatility in the US equities market. Pleasingly the deal attracted strong representation from a broad range of quality investors with the book well covered. We are now (moving).. towards executing our plan to sell 100% of GWB."
As Australia's largest bank by total assets, NAB has been struggling to keep pace with its domestically focused peers, such as Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) over the past decade. As its foreign assets diverted management's attention and weighed on group profits.
However the latest move by the bank's fresh-faced CEO appears to be a step in the right direction. Indeed, Mr Thorburn said: "Today is an important step in the next stage of our strategy in focusing on building a stronger core Australian and New Zealand franchise."
Buy, Hold, or Sell?
The IPO tomorrow is a good one for NAB and complements its recent decision to divest around $1 billion of bad UK commercial property loans, earlier in the year. However, with a number of risks in the UK ongoing, as well as a portfolio of bad debts still remaining, NAB is best left on your watchlist for now.
