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Stronger circle of Crown owners proposed for Kiwibank

Stronger circle of Crown owners proposed for Kiwibank

The Crown’s two major investment funds, the New Zealand Superannuation Fund and the Accident Compensation Corporation (ACC), may soon join New Zealand Post as the owners of Kiwi Group Holdings (KGH) Limited.

New Zealand Post Group Chairman Sir Michael Cullen announced today that New Zealand Post has received an indicative offer from the NZ Super Fund and ACC to purchase 25% and 20% respectively of Kiwi Group Holdings Limited. The indicative offer, which is subject to a number of matters including due diligence, has been priced on a commercial basis, and reflects the Government’s absolute position that Kiwibank must remain in public ownership. The offer is based on valuing KGH at $1.1 billion, which would mean New Zealand Post receiving $495 million.

KGH is the company that owns Kiwibank and its associated businesses such as Kiwi Wealth Management and Kiwi Insurance.

Sir Michael said that “no deal has been finalised yet and it will take some weeks for a process to be worked through, however we wanted to be proactive in our disclosure”.

Sir Michael said: “New Zealand Post approached the Government and pursued the initiative because it considers that NZ Super Fund and ACC are strong potential shareholders for Kiwibank as a Crown-owned bank. The two investment funds hold assets of over $60 billion between them, while New Zealand Post continues to face headwinds in its core mail business.”

There are various conditions to be met before the proposed transaction can proceed including due diligence, transaction documentation, board approvals and regulatory approval. It is intended that the transaction be completed by the end of New Zealand Post Group’s current financial year.

Sir Michael said the New Zealand Post Board believes that securing an agreement with these two Crown investors – both essential parts of the New Zealand fabric – would be of significant long term benefit to Kiwibank.

“The sovereign-status NZ Super Fund and ACC are proven public sector investors. Their long-term investment horizons, expertise and access to capital would complement New Zealand Post as a shareholder and support the ongoing development of Kiwibank.”

Sir Michael said New Zealand Post has provided approximately $400 million of capital to Kiwibank over its lifetime. “We believe now is the right time to broaden the bank’s support base within the wider public sector, and this provides the NZ Super Fund and ACC with a rare opportunity to secure a significant minority stake in a large and well-performing unlisted New Zealand business.”

The proceeds would allow New Zealand Post to invest in its core parcels, packages and letters business and pay down debt. It is anticipated that a special dividend would also be paid to the Crown, Sir Michael said.

In terms of other matters to be disclosed, it should be noted that in the process of considering the possible transaction it has become clear to the New Zealand Post Board that, in any event, the future of the New Zealand Post guarantee of Kiwibank’s payment obligations will need to be addressed, he said.

"At the time of completing the transaction, New Zealand Post would give not less than three months notice to remove the guarantee. This change would not apply to obligations incurred prior to the date of termination, only future obligations."

ENDS

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