National float gains ground as ANZ waits

By PAULA OLIVER

The ANZ bank will find out today whether it has the Commerce Commission's approval to buy the National Bank - but talk about a float of the British-owned bank is gathering pace.

The Business Herald understands that those involved in Lloyds TSB's sale of the National Bank have warmed to the idea of a float or partial float for two reasons:

* Equity markets are stronger than they were when the sale process began.

* Bidders who want to buy the bank outright are dropping out, leaving only a whimper of price competition.

ANZ is the only known bidder left in the sale process after Westpac and the Commonwealth Bank of Australia pulled out.

London-based giant HSBC has been rumoured to be interested and Lloyds TSB has said that other parties are involved, but nothing concrete has emerged.

Today's decision by the Commerce Commission is the next step in a sale process that began in June.

ANZ admitted in its application for clearance to buy the National Bank that the merged entity would break safe harbour guidelines in almost all of the markets in which it operated.

But it said it should be allowed to go ahead with the purchase anyway because competition in banking was strong.

It is understood that while the sale process has slowed and bidders have dropped out, the prospects of a float have strengthened.

"The IPO (initial public offering) is a very real option," a source close to the process yesterday said.

"The markets have fundamentally changed since the start of the process.

"Every man and his dog was knocking down the door," the source added, "but the fewer they get the more an IPO becomes a very real option."

Lloyds TSB has maintained from the start of the process that it responded to approaches from interested suitors.

It has been careful to indicate that it is not a distressed seller, and that it could decide to hold on to the National Bank if other options would not yield the return it wanted.

The markets have speculated that the desired price tag on the bank could be as high as $7 billion.

It is believed that a trade sale is still the favoured option for Lloyds TSB.

However, if ANZ is the only bidder it could become difficult to get that price.

Some banking sources have suggested that this week's stronger whispers about a float could be nothing more than a tactical move designed to put pressure on ANZ.

"Talk about an IPO is sending a pretty obvious signal to the people left in the process that they have to be better than the IPO price, or else why would Lloyds want to do it?" one said.

It is not yet clear if a partial float is being considered.

Many market observers believe that a float of the whole bank would be too much for the NZX to swallow in one bite - it would dwarf Telecom's partial float.

But there is little doubt that a partial float of an asset like the National Bank would attract widespread interest locally and internationally.

Local fund managers expect approaches to sound out the prospects of a float would start overseas.

Should ANZ gain approval today from the Commerce Commission, it is possible the sale process could be concluded soon.

However, as a source close to the process yesterday suggested: "There's also an argument for slowing things down to let the IPO markets come up to speed."

The story so far

APRIL - Sources say Lloyds TSB wants to sell National Bank.

JUNE - ANZ says it is "least likely buyer" for National

Lloyds TSB admits it has hired Deutsche Bank to examine sale option for National

JULY - Lloyds TSB receives indicative bids.

AUGUST - Speculation focuses on Westpac, ANZ and HSBC as buyers

Waikato entrepreneur Phil Verry and son Marty say they want to bid

ANZ, then Westpac, lodge applications with Commerce Commission to buy National

Commonwealth Bank denies involvement

Reserve Bank demands compliance from potential buyers

SEPTEMBER - Westpac withdraws from sale process.

TODAY - Commerce Commission rules on ANZ application