New Zealand Post is selling 45% of Kiwibank for $1 billion

Customers walk into the New Zealand Post shop. Photo: Hannah Peters/ Getty Images.

Troubled state-owned New Zealand Post is selling 45% of Kiwibank — 25% to the New Zealand Super Fund and 20% to the Accident Compensation Corporation (ACC).

The deal values Kiwibank at $NZ1.1 billion ($A901 million), NZ Post chairman Sir Michael Cullen said. Both entities are owned by the New Zealand government.

If the sale goes ahead, NZ Post will receive $NZ495 million ($446 million) for its stake. It is not clear what it would do with the money.

“There’s no sale of Kiwibank outside Government ownership,” Cullen said, adding that if there had been a sale into private ownership it would have “almost certainly led to a higher price”.

While there would be no fresh cash for Kiwibank, Cullen said money could be raised through later sales of shares to the investors. There was no “bottom line” below which NZ Post would go, raising the prospect of a complete sale.

However, any shares put up by NZ Super or ACC would have to be sold back to the Crown.

The two organisations will be required to hold their stakes in the bank for at least five years.

The sale is expected to trigger a ratings downgrade from Standard & Poors.

Currently depositors in Kiwibank have an explicit guarantee from NZ Post, however this will be lifted once the sale takes place.

Cullen said there was no added risk to deposits – he personally was leaving all of his liquid assets in the bank.

None of the Australian banks had the guarantee which is currently offered to Kiwibank depositors, meaning the lifting of the current arrangement would simply put the bank on the same level as other banks.

Not a done deal yet

NZ Post is losing up to $NZ30 million ($A27 million) a year thanks to its mail business, while Kiwibank is becoming increasingly profitable.

Cullen said it was clear that NZ Post was unlikely to be able to put more money into Kiwibank, and that as the bank grew it may need fresh injections.

It was possible that the added capital would come from NZ Post further selling down its stake.

Finance Minister Bill English said the deal kept the bank in NZ ownership.

“Kiwibank will remain 100% government-owned – that is a bottom-line,” Finance Minister Bill English said.

“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.”

Cullen insisted it was “not a done deal yet”. The indicative price was the “lowest level” at which the company would be comfortable selling its stake. If during due diligence the buyers attempted to push down the price, the deal could collapse.

It was possible under the current legislation that NZ Post could sell the entire bank. However, the commitment of the Crown to buy back the shares if ACC or the super fund sold increased the guarantee.

None of the proceeds of the sale would go to Kiwibank, with the cash used to pay a special dividend, reduce debt and increase its own capital.

NZ Post reported a net profit after tax of $NZ110 million for the six months December 31, up $NZ10m on 2014. However, it has been fighting dwindling mail volumes for years, and revenue has fallen.

Earlier this month it confirmed it was set to cut another 500 staff, mainly management and specialists from its headquarters, as well as in Auckland and Christchurch.

The cuts are expected to be completed by July.

The volume of letters in New Zealand is still dropping by about 60 million a year, and is forecast to fall below 500 million.

Cullen said he approached Prime Minister John Key about the possible sale in 2014 and had a formal approach from NZ Super about the investment in 2015.

Key was willing to support the sale if it remained in Crown ownership.

Cullen is due to stand down as the chair of NZ Post at the end of the month, but he understood he would be asked to stay on for another six months.

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