NZ Super Fund, ACC confirm investment in Kiwi Group Holdings Limited
The NZ Super Fund and ACC today settled their investment in Kiwi Group Holdings Limited (KGHL), the owner of Kiwibank.
NZ Super Fund has taken a 25% stake from NZ Post for $263 million. ACC has invested $231 million for a 22% stake, with the $494 million deal valuing KGHL at $1,050 million.
NZ Super Fund Chief Executive Officer Adrian Orr said: “Investment opportunities of this size and potential are rare in New Zealand. As a New Zealand investor with a long-term view, strong financial expertise and available capital, the NZ Super Fund is in an excellent position to help Kiwibank achieve its long-term promise.
“We are delighted to become part of the Kiwibank story and look forward to working with ACC and NZ Post to support Kiwibank’s on-going success. We believe Kiwibank will make an important contribution to portfolio returns over the long term and take pleasure in adding another major New Zealand investment to the Fund.”
The NZ Super Fund has more than $4 billion in New Zealand, including large investments in Kaingaroa Timberlands, Datacom, Metlifecare and rural farmland.
ACC Board Chair Dame Paula Rebstock said: “ACC invests to ensure Kiwis pay less in levies for accident cover. We therefore welcome the opportunity to invest in Kiwibank which has a strong growth potential that will contribute to the on-going financial sustainability of the ACC Scheme.
“We look forward to working closely with NZ Post and the NZ Super Fund to put Kiwibank on a strong footing for future expansion providing enhanced offerings to customers and businesses.”
As part of the transaction, NZ Post will reinvest $90 million of its proceeds back into Kiwibank to make its capital ratios comparable with the other major banks in New Zealand supporting further growth of the business.
Kiwibank has grown quickly since inception in 2002. Now New Zealand’s fifth-largest bank, it has built a leading brand, has a customer base in excess of one million and a market share of 12%. It also possesses one of the highest quality mortgage books of the New Zealand banks. KGHL also owns Kiwi Wealth Management Limited, Kiwi Insurance Limited and New Zealand Home Loans.
Announcements by NZ Super Fund and ACC on Board appointments to Kiwibank will be made in due course following Reserve Bank approval.
What has changed since the initial announcement?
The price that has been agreed is $494 million for 47% of the company instead of the indicative offer of $495 million for 45% of the company. This values KGHL as $1.050 billion instead of the $1.1 billion it was valued at by the investors at the time of the indicative offer.
ACC will take a stake of 22% instead of the 20% initially proposed.
Why did the price reduce?
The main driver was the weaker second half performance of Kiwibank, as per Kiwibank’s 2015/16 Annual Result.
Why did ACC raise its stake in the company?
To provide flexibility within the Shareholder Agreement (the right to appoint a director applies to any shareholder with 20% or more). If ACC didn’t participate in a capital raise, then it would lose this right, so it has built in a buffer.
Why is $90 million of NZ Post’s proceeds being left in the business?
This was negotiated between the shareholders and has the effect of putting Kiwibank on a similar capital footing to the big Australian banks.
Have there been any changes to the restrictions on the new shareholders’ ability to sell outside of Crown ownership?
No. ACC and NZSF will not be able to sell outside the existing circle of shareholders for a period of five years. After that point, if they do wish to sell, the Government has the option to buy the shares back before they are offered to any third parties.
Why did due diligence take longer than expected?
On reflection the original timetable was too ambitious, given the number of parties involved and the size and complexity of the transaction.