Shares in ANZ NZ's finance company UDC may be sold to the public after OIO blocked its sale to opaque Chinese company

Shares in ANZ NZ's finance company UDC may be sold to the public after OIO blocked its sale to opaque Chinese company

ANZ says it's considering an initial public offering of shares in finance company subsidiary UDC Finance.

This comes after the Overseas Investment Office blocked the $660 million sale of UDC to opaque Chinese firm HNA Group late last year.

The bank now says it'll explore the possibility of an initial public offering (IPO) of ordinary shares in UDC as part of a range of strategic options for UDC’s future. UDC is an asset financier funding plant equipment, vehicles and machinery. It also takes deposits from the public making UDC a non-bank deposit taker regulated by the Reserve Bank.

 “We have been looking at strategic options for UDC’s future for some time as part of ANZ’s strategy to simplify the bank and improve capital efficiency," ANZ New Zealand CEO David Hisco said in a statement.

“While UDC is continuing to perform well and there is no immediate requirement to make decisions, after last year’s planned sale to HNA did not proceed it makes sense to keep examining a broad range of options for UDC’s future. This will include exploring whether, subject to market conditions, an IPO would be in the interests of UDC’s staff and customers, and ANZ shareholders." 

“The range of strategic options we have for UDC, including approaches we have received regarding the business and the option of retaining it, will take a number of months to examine before any decision is made. In the meantime, it will continue to be business as usual for UDC,” Hisco added.

Since the HNA sale fell through Heartland Bank has expressed renewed interest in UDC, and Australian media reports have also suggested private equity interest.

As of December 31, UDC had secured deposits of $972 million. There's also funding from ANZ with UDC's annual report for the year to September 30 showing ANZ had advanced $1.385 billion to UDC as of that date, up from $595 million the year before. UDC's ANZ credit facility was increased to $2.7 billion in November.

As of December 31 UDC had net loans of $2.91 billion and total assets of $3.65 billion. UDC's September year net profit after tax was $61.646 million, a record high.

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At this ripe stage of the credit cycle, I think UDC downside potential is underestimated. Like others, its had a good tailwind. ANZs timing of its divestment is the only good thing here (for its shareholders).

The IPO suggestion sounds a little bit desperate at this stage.

It may be a good long -term hold .

As a Finance Company it must stick to its knitting , lend only as first secured lender against tangible assets and equipment , and insist on a deposit so the borrower has skin in the asset

As long as its well Capitalized , and run properly , it should be around for the next 100 years