National Bank Sale: Nz Bid Faces Fewer Hurdles
MEDIA RELEASE - for immediate use 21 August 2003
NATIONAL BANK SALE: NZ BID FACES FEWER HURDLES
The New Zealand bid to buy the National Bank, Black Horse Holdings Consortium (BHH), says it expects to be in a position to announce three important developments next week.
"We are very encouraged by the way this project is evolving. A lot of hard work is going in by a range of people," says BHH Consortium spokesperson, Phil Verry.
Verry notes that the BHH bid has none of the myriad of hurdles to overcome that are, or would be, faced by an Australian bank also bidding for the National Bank.
"Those challenges should certainly not be underestimated," Verry says.
The hurdles faced by the Australian bidders include: the Commerce Commission's concerns about market concentration and the risk of de facto cartelisation of the New Zealand trading bank sector if dominated by Australian banks; and the Reserve Bank's concerns about systemic risk to the New Zealand banking system in the event of failure by an Australian bank, about the transfer from New Zealand of the intellectual property needed to operate an independent banking service, and about excessive exposure of the New Zealand economy to the Australian economy.
In addition, some parliamentarians have voiced strong concerns about discrimination by Australian law against New Zealand depositors, in the event of the collapse of an Australian bank; with a call for the Government to block a sale to an Australian bank.
"Even if these hurdles can be surmounted, an Australian bank would then face the distinct risk of loss of shareholder value, from the price paid for the National Bank, due to: likely National Bank staff redundancies and branch closures; customer dislocation and discontent; and the consequential ongoing erosion of market share, which is the typical aftermath of such bank mergers," Verry says.
"BHH has none of these hurdles. We would prefer to retain the brand and an on-going commercial relationship with Lloyds too," he says.
Verry cautions against the risk of un-researched proposals, such as one that the government should buy the National Bank.
"It is unhelpful to have the potential distraction of completely un-researched ideas being aired. Early in our investigations, we examined the possibility of purchase of the bank by government, or by the NZ Superannuation Fund. We rejected both, because they were conceptually deficient and would represent an imprudent investment risk," Verry says.
"The National Bank, in its present form, has already attained a high level of profit optimisation. Without a strong proactive supportive fostering shareholder - all of those - future growth may not provide an adequate balance between risk and reward. It is only a little over a decade ago that the government practically gave away a major trading bank," he says.
Phil Verry says the BHH strategy has been carefully designed to take the National Bank to a new level.
"BHH is specifically designed as the ideal shareholder. If we are given the opportunity to buy the bank, there will be a far better investment opportunity for the NZ Superannuation Fund and for other investors, in the listed tradable shares, than would be the case with state acquisition of the bank with consequential investment lock-in," Verry says.
Phil Verry corrects a media report, which describes him as "a former New Zealand wool industry executive".
"My primary career was in chartered accounting, with emphasis upon new business start-ups" Verry says. After withdrawing as a senior partner in the Wellington office of the firm now known as PriceWaterhouseCoopers, he took on a variety of public and private company directorships, latterly concentrated upon major projects.
"I have never been an employee within the wool industry. My principal wool industry role has been to research, design and lead the implementation of the macro changes needed if the failing non-merino wool industry is to have a viable future. There have been a number of notable successes, two of which, in particular, have produced very major benefits for every woolgrower."
"This role has been entirely professionally entrepreneurial, not 'executive'. My only other wool industry roles have been as a director of various industry bodies, including the NZ Wool Board, at the request of growers" says Phil Verry.
The Black Horse Holdings Consortium is now completing the appointments to the professional / technical team of people who will take up executive roles, the details of which will be announced to the media shortly.