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NZ Post set to sell Kiwibank stake

NZ NewswireNZ Newswire 6/04/2016

Kiwibank © Getty Images Kiwibank

New Zealand Post is looking to sell 45 per cent of its stake in subsidiary Kiwibank in a proposed deal that would reap the struggling government-owned mail business close to $500 million.

While the deal is still to be finalised, 25 per cent of New Zealand Post's share in Kiwi Group Holdings - the company that owns Kiwibank - would be sold to the Superannuation Fund and 20 per cent to ACC.

The indicative offer values Kiwibank at $1.1 billion, which means New Zealand Post is potentially in line to receive $495m.

Because the Super Fund and ACC are Crown entities, the bank would remain 100 per cent government-owned, which Finance Minister Bill English says is a bottom line.

Under the proposal, the Super Fund and ACC would have to hold on to their shares for five years.

Beyond that, the government would have right of first refusal over any future share sales, which Mr English says would be exercised.

"This government, if it was offered the bank, would buy it back, we wouldn't sell it outside government," he told reporters.

New Zealand Post Group chair Sir Michael Cullen said with ongoing changes and declines in the core mail business, it's clear Kiwibank's parent company isn't going to be able to put more capital into the bank.

Sir Michael described the Super Fund and ACC as "strong potential shareholders" with assets of over $60 billion between them.

"This is a stronger mechanism for Kiwibank to grow," he said.

New Zealand Post would use the proceeds of the share sale to pay down debt and invest back into its core business.

It's also expected a special dividend would be paid to the government, though it's unclear at this stage how much that might be.

Sir Michael emphasised that it was not a move towards the partial privatisation of Kiwibank.

However, over time the Super Fund and ACC may increase their shareholdings, he said.

Prime Minister John Key said the proposal "ticks all the boxes", offering Kiwibank access to more capital, giving it greater capacity to grow.

He expects that in 10 to 20 years time, ACC and the Super Fund will still be shareholders and Kiwibank will be a much bigger organisation.

Late last month New Zealand Post announced plans to shed another 500 jobs as it struggles with declining mail volumes and revenue.

It has cut staff in recent years and sold non-core assets to help it cope with reduced earnings.

New Zealand Post has provided around $400m to the Kiwibank over its lifetime.

The share sale won't mean any changes for Kiwibank customers.

WHAT NZ POST'S POTENTIAL SALE OF KIWIBANK SHARES MEANSĀ 

* NZ Post wants to sell 45 per cent of its stake in Kiwibank - 25 per cent to the NZ Super Fund and 20 per cent to ACC

* The deal is still to be finalised * Indicative offer based on valuing Kiwibank at $1.1 billion, meaning NZ Post would get $495 million

* Super Fund and ACC are both Crown entities, so Kiwibank would remain 100 per cent government-owned under the deal

* Proceeds from the share sale would be used to pay down debt and invest in NZ Post's core parcels, packages and letters business

* Government would have pre-emptive right to buy any shares the Super Fund or ACC might sell in future. Both entities would have to hold on to their shares for five years

* NZ Post will continue to be an owner of Kiwibank, but the Super Fund and ACC may become larger shareholders over time

* NZ Post has provided approximately $400m in capital to Kiwibank over its lifetime.

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