45% of Kiwibank to be sold by NZ Post to Govt funds

Bill English has announced:

NZ Post’s proposal for the Accident Compensation Corporation (ACC) and the NZ Super Fund (NZSF) to purchase part of Kiwibank will ensure the bank remains wholly owned by the Government, Ministers Bill English and Todd McClay say.

Kiwibank is currently a subsidiary of NZ Post. If the proposal goes ahead, a total of 45 per cent would be owned by the two additional taxpayer-owned shareholders.

“Kiwibank will remain 100 per cent Government-owned – that is a bottom-line,” Finance Minister Bill English says.

“To ensure this occurs, the proposal includes a right of first refusal for the Government over any future sale of shares – which we would exercise.”

State Owned Enterprises Minister Todd McClay says that the proposal, which values Kiwibank at $1.1 billion, could see benefits for Kiwibank, NZ Post, ACC, NZSF and taxpayers – but needs to stack up for all parties before it proceeds.

“When NZ Post’s Chair Sir Michael Cullen approached Ministers with the proposal, he explained it could give Kiwibank access to extra sources of capital for future growth and broaden its exposure to commercial expertise,” Mr McClay says.

Very interesting.

This is a proposal from NZ Post to the Government, not vice-versa.

On first glance it seems an improvement on the status quo. The NZ Super Fund and ACC have highly skilled investment staff who would be very good at weighing up decisions around future capital for Kiwibank to grow.

NZ Post has limited capacity to invest more in Kiwibank, as its main business line is fading.

Personally I’d sell both NZ Post and Kiwibank, but that is politically not going to happen.

“NZSF and ACC would have an investment in a profitable local company. NZ Post would receive a return for the shares, some of which would be used to repay debt built up to support Kiwibank’s expansion and some would be paid to the Government as a special dividend.”

NZ Post, NZSF and ACC are currently in discussions over the details of the transaction. A final decision about whether it goes ahead will be made later this financial year.

I can’t see any reason to say no, so long as the price for the shares is fair.