NZ Post announces Kiwibank deal completion
31 October, 2016
NZ Post announces Kiwibank deal completion
New Zealand Post Chief Executive Brian Roche announced today the successful completion of the partial sale of Kiwibank’s holding company Kiwi Group Holdings Limited (KGHL) to the NZ Super Fund and the Accident Compensation Corporation (ACC).
The NZ Super Fund has invested $263 million for a 25% stake in KGHL, and ACC has invested $231 million for a 22% stake – with the $494 million deal based on the investors valuing KGHL at $1,050 million.
Mr Roche said he was pleased that the transaction has been finalised, having been actively discussed by the parties since early 2015 and formally notified to the NZX in April, 2016.
“This is a big day for Kiwibank and – ultimately, for New Zealanders, who will retain 100% ownership of a much stronger bank. Kiwibank now has access to new streams of capital and is positioned strongly to compete against the other major banks.
“New Zealand Post retains majority ownership of Kiwibank and will use the proceeds to pay down debt and pay a special dividend to the Crown. It can now focus more time and energy on completing the transformation of its parcels, logistics and mail business.”
Mr Roche said that as with any transaction of this size and complexity, there was a great amount of detail that had to be worked through. New Zealand Post is satisfied that the deal reached by the three parties is in the best future interests of Kiwibank, he said.
“It’s a fair price that reinforces the investors’ confidence in Kiwibank as a good long term investment, while also reflecting the prescribed limits on their ability to on-sell their stakes and the general market conditions faced within the financial sector.”
New Zealand Post will now reinvest $90 million of its proceeds back into the bank, pre-empting future capital requirements and underpinning its platform for future growth, Mr Roche said.
Fact File and Q and As
• Kiwi Group Holdings Limited will remain 100% Crown-owned
• Kiwi Group Holdings Limited is the holding company of Kiwibank
Limited, Kiwi Wealth Management (which includes Gareth Morgan
Investments), The New Zealand Home Loan Company Limited, Kiwi
Insurance Limited, Kiwi Financial Services Retail Ltd and Kiwi Capital
• Kiwibank has been operating for more than 14 years and has total assets, at 30 June, of $19.4 billion
• Kiwibank has more than 1 million customers, about 420,000 have
Kiwibank as their main bank
• Kiwi Group Holdings produced a net profit after tax (NPAT) of $131 million in the year to June 2016.
Q and A
Could the NZ Super Fund and ACC sell to overseas investors?
The Government’s stated policy is that Kiwibank remains 100% Crown owned. The Government has a pre-emptive right to buy shares that either the NZ Super Fund or ACC wish to sell. In any event, the two parties cannot sell outside the existing shareholder base within the first five years.
What amount of dividend will be paid to the Crown?
The special dividend to the Crown will be formally determined by the NZ Post Board and is expected to be in the region of $200 million.
What happens to the NZ Post Guarantee?
The NZ Post Guarantee is to be withdrawn on 28 February, 2017. Deposits already with Kiwibank and any deposits Kiwibank accepts on or before that date will be covered by the NZ Post Guarantee. Deposits accepted after that date will not be covered by the NZ Post Guarantee.
Does Kiwibank require access to alternative streams of capital?
In line with Kiwibank’s existing strategy and although it self-generates capital the bank may require additional capital to grow its product and service offering over time, for example by broadening its wealth and insurance business and growing its small to medium business customer base.
Is there expected to be an impact on New Zealand Post’s and Kiwibank’s credit rating following this announcement?
There is no expected impact on New Zealand Post's credit rating.
We expect credit rating agencies will lower Kiwibank’s credit rating once the NZ Post Guarantee is terminated.
What are NZ Post’s long-term intentions?
New Zealand Post will continue to be a Kiwibank owner and support the bank’s strategy. The NZ Super Fund and ACC may become larger shareholders through capital investment over time, including the reinvestment of dividends. This would result in a dilution of the New Zealand Post shareholding.