New Zealand Post to sell 45pc of Kiwibank to ACC and NZ Super Fund

New Zealand Post Group chairman Sir Michael Cullen announcing the company's decision to sell-off part of Kiwibank during a press conference in Wellington. Photo / Mark Mitchell

New Zealand Post Group has received a $495 million indicative offer from the NZ Superannuation Fund and Accident Compensation Corp to buy 25 percent and 20 percent respectively of subsidiary Kiwi Group Holdings, which owns Kiwibank.

The indicative offer, which is subject to a number of conditions including due diligence and board and regulatory approval, values KGH at $1.1 billion though the final price is still to be determined.

KGH owns Kiwibank and its associated businesses such as Kiwi Wealth Management and Kiwi Insurance.

NZ Post chairman Michael Cullen said the offer reflects the government's absolute position that Kiwibank must remain in public ownership.

"No deal has been finalised yet and it will take some weeks for a process to be worked through, however, we wanted to be proactive in our disclosure," he said.

Under the deal, the government would have pre-emptive rights to buy shares that either the Super Fund or ACC wanted to on-sell and in any event, they can't sell outside of the existing shareholder base within the first five years.

State Owned Enterprises Minister Todd McClay said the proposal "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 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," McClay said.

The deal was prompted by NZ Post as it considers the Super Fund and ACC are strong potential shareholders and the state-owned enterprise faces an on-going decline in its core mail business and can no longer provide further capital to the bank. NZ Post has provided around $400 million of capital to Kiwibank since it was set up 14 years ago, funded by debt.

It is intended that the transaction is completed by the end of New Zealand Post's current financial year on June 30.

Sir Michael said the NZ Post board believed securing an agreement with the two Crown entities would significantly benefit Kiwibank long-term.

"The sovereign-status NZ Super Fund and ACC are proven public sector investors. Their long-term investment horizons, expertise and access to capital would complement New Zealand Post as a shareholder and support the ongoing development of Kiwibank."

The proceeds of the sale will be used by NZ Post to invest in its core parcels, packages, and letters business and pay down debt, along with a special dividend to the Crown.

Cullen also said that when considering the possible transaction, it became clear to the board that NZ Post will need, in any event, to change its guarantee of Kiwibank's payment obligations in future.

ACT leader David Seymour called the proposal an "odd in-house partial privatisation" that was "just reshuffling deck chairs".

"The New Zealand taxpayer will still bear all the risks of investing in a bank," he said. "It would have been braver and better to sell part or all of Kiwibank to private owners, following the successful mixed-ownership model applied to Mighty River Power, Meridian, and Genesis.

Kiwibank produced a profit of $132 million in the year to June 2015 and has nearly a million customers.

Read the statements issued by both companies here: