Like a committed parent, former Finance Minister Sir Michael Cullen proposes Kiwibank be taken out of the care of the ailing NZ Post, which he chairs, and entrusted to one of his other creations, the NZ Superannuation Fund, and the ACC. Together, he believes, they could provide the bank with the additional capital it needs to compete successfully with the big banks.
The only good thing that can be said for this proposition is that it is preferable to the instinct of the Greens (and possibly Labour these days) to give the bank an injection from taxpayers. The Super Fund and ACC both have very good investment records and, left alone, each could be trusted to make sound commercial decisions on Kiwibank's capital requirements. But the worry with the proposal is that the funds may not be left free to make the best decisions for this asset.
NZ Post will remain the majority shareholder and it is not clear that the two publicly owned funds are even voluntary purchasers of minority stakes. If they were in the private sector there would be no reason to doubt they saw sufficient potential additional value in Kiwibank to make it worth their investment. But in these circumstances it is hard to believe the funds have not been under some pressure to buy a stake simply for the sake of keeping all of the bank in public ownership.
Under the deal offered to them, the Government will have the first right to buy their shares should they want to capitalise on the investment at any stage, and for the first five years they cannot sell to anyone outside the existing shareholders. Those restrictions will be reflected in the funds' offers, totalling $495 million for 45 per cent of Kiwi Group Holdings which includes the bank's associated businesses Kiwi Wealth Management and Kiwi Insurance. The offer has yet to be accepted by the NZ Post Group but the fact its chairman has announced it suggests it will be.
It was Sir Michael who approached the Government with the proposal, according to the Minister of State Owned Enterprise, Todd McClay. NZ Post certainly needs the money more than it needs the bank. But almost certainly it is being offered less than the bank would be worth if it could be sold without restrictions designed to keep it wholly in public ownership. The offer price represents a return of not much more than the $400 million of capital NZ Post has put into Kiwibank since it was established 14 years ago.
It would be interesting to discover the bank's true value in an open sale. The prospective buyers have yet to complete due diligence and need to assure themselves that they are not being lumbered with an asset that cannot justify even a price discounted for restrictive resale conditions.
Kiwibank was set up for a political purpose. Its real parent was Jim Anderton, whose Alliance Party, Labour's coalition partner in its first term, wanted to keep the big banks "honest".
Since then mergers have made the big banks bigger and Kiwibank remains a minnow. Do we really need it?