The NZ taxpayer is taking full control of Kiwibank in a transaction that will see the Government buying out existing owners NZ Post, NZ Super Fund and ACC - a deal that values the Kiwibank parent company at about $2.1 billion.
A shuffle of the shareholding of Kiwibank's parent company Kiwi Group Holdings (KGH) has been looming since early this year.
The Crown acquisition was announced by Finance Minister Grant Robertson on Monday.
“While the Crown essentially owned KGH through Crown-owned entities, an ongoing shareholding in Kiwibank did not fit NZ Post’s and ACC’s long term strategic and investment plans," Robertson said.
"NZ Super Fund had been interested in purchasing a majority holding in KGH, but withdrew its interest as it did not align with the Government’s commitment to public and New Zealand ownership," he said.
In a separate statement NZ Super Fund chief executive Matt Whineray said: “We initially considered buying some or all of NZ Post’s stake and discussed this matter with the Government, but ultimately weren’t able to get agreement on two key issues relating to the asset. Specifically, we sought the flexibility to introduce private sector capital and governance capabilities into the business, and as a wholly-commercial investor we sought to preserve all options for exiting the investment in the future.
“These requirements understandably did not fit with the Government’s objective for the ownership of Kiwibank.”
Robertson said the process of acquisition is "a straightforward transfer of assets" and it will not change the overall value of the Crown’s consolidated balance sheet.
"It does require the government to fund its contribution for the purchase, which will be done through the multi-year capital allowance. This means the cost to purchase is already part of the borrowing programme published at Budget 2022."
Kiwibank and NZ Home Loans will continue to operate independently and "at arm’s length from the Government", Robertson said.
The Crown’s ownership of KGH will be expressed through a newly incorporated Schedule 4A company, Kiwi Group Capital (KGC) with a separate board.
The Government is fully committed to supporting Kiwibank to be a genuine competitor in the banking industry – "ensuring the bank has access to capital to continue to grow on a commercially sustainable basis and offer a viable and competitive alternative for New Zealanders," Robertson said.
Kiwibank chief Executive Steve Jurkovich said the announcement would enable Kiwibank, the biggest New Zealand-owned bank, "to continue to deliver on its growth ambitions and have even more impact for its people, customers, and Aotearoa".
“The key to having a positive long-term impact is remaining focused on being competitive and balancing performance and purpose. The refreshed arrangements will ensure a continuance of good governance and ownership stability."
The announcement follows the sale exactly a week ago by Kiwi Group Holdings of funds management business and KiwiSaver default fund provider Kiwi Wealth to Fisher Funds for $310 million.
Also last week Kiwibank announced that annual profit rose to a record high as income surged and the bank grew lending faster than system, or market-wide, growth. It said June year net profit after tax rose $5 million, or 4%, to $131 million from $126 million in the year to June 2021. The bank's previous record annual profit was $127 million in 2015.
Kiwi Group Holdings is currently owned by New Zealand Post, the Accident Compensation Corporation and the NZ Superannuation Fund after ACC and the Super Fund bought in back in 2016.
When announcing that the ownership of KGH was up for discussion earlier this year, a spokesperson for Robertson then said that since 31 October 2021, any shares offered by any Kiwi Group Holdings shareholder and not taken up by other existing Kiwi Group Holdings shareholders would be available for the Crown to purchase directly.
The 2016 deal saw the NZ Super Fund invest $263 million for a 25% stake, and ACC $231 million for a 22% stake, valuing Kiwi Group Holdings at $1.050 billion. NZ Post retained 53%.
This is the Statement from Grant Robertson:
The Government has acquired 100 percent of Kiwibank’s parent company, Kiwi Group Holdings (KGH), ensuring the bank remains fully Kiwi-owned.
KGH, which also operates New Zealand Homes Loans, had been owned by NZ Post, ACC and the NZ Super Fund. Under the terms of the agreement when ACC and NZ Super Fund became shareholders in 2016, the Government had first right of refusal over any future sale of shares.
“The transaction ensures Kiwibank remains 100 percent Kiwi-owned, a bottom line pledge that the previous National Government also made in 2016 when the current ownership arrangements were entered into,” Finance Minister Grant Robertson said.
“While the Crown essentially owned KGH through Crown-owned entities, an ongoing shareholding in Kiwibank did not fit NZ Post’s and ACC’s long term strategic and investment plans. NZ Super Fund had been interested in purchasing a majority holding in KGH, but withdrew its interest as it did not align with the Government’s commitment to public and New Zealand ownership.
“The Government is grateful for the investment and support given to KGH from the departing shareholders over the past 20 years. Their contribution and commitment, particularly collectively since 2016, has set Kiwibank up strongly for future growth.
“The new ownership structure simplifies our ability to fully support Kiwibank to meet its future potential. The transaction is subject to regulatory approval by the Reserve Bank.
“The Government is fully committed to supporting Kiwibank to be a genuine competitor in the banking industry – ensuring the bank has access to capital to continue to grow on a commercially sustainable basis and offer a viable and competitive alternative for New Zealanders.
“This is a win-win for the Crown, Kiwibank and for New Zealanders.
“Kiwibank and NZ Home Loans will continue to operate independently and at arm’s length from the Government. The Crown’s ownership of KGH will be expressed through a newly incorporated Schedule 4A company, Kiwi Group Capital (KGC) with a separate board.
“The transaction values KGH at $2.1 billion. The process of acquisition is a straightforward transfer of assets and it will not change the overall value of the Crown’s consolidated balance sheet. It does require the government to fund its contribution for the purchase, which will be done through the multi-year capital allowance. This means the cost to purchase is already part of the borrowing programme published at Budget 2022.
“I want to be clear that this will be business as usual for both Kiwibank and New Zealand Home Loans staff and customers.
“With Kiwibank staying in New Zealand hands, New Zealanders can continue to bank with a trusted, credible and competitive banking option that will remain fully locally owned. With a significant commitment from the Crown to invest in the bank’s future success, Kiwis can be assured Kiwibank has a very bright future,” Grant Robertson said.
This is the announcement from NZ Super Fund:
The Guardians of New Zealand Superannuation, the Crown entity that manages the NZ Super Fund, confirmed today it will accept the Crown’s $527 million offer for its 25 percent shareholding in Kiwi Group Holdings Ltd (KGHL), which owns Kiwibank and New Zealand Home Loans.
NZ Super Fund Chief Executive Matt Whineray said the Crown’s offer presented a fair and attractive opportunity for NZ Super Fund to realise its six-year investment in the company. The transaction is subject to regulatory approval by the Reserve Bank of New Zealand - Te Pūtea Matua.
“Kiwibank has performed well during the time we have been a shareholder and we believe our involvement played a crucial part in kickstarting that growth. Kiwibank is in good shape, has excellent leadership and strong prospects for the future,” says Mr Whineray.
“We initially considered buying some or all of NZ Post’s stake and discussed this matter with the Government, but ultimately weren’t able to get agreement on two key issues relating to the asset. Specifically, we sought the flexibility to introduce private sector capital and governance capabilities into the business, and as a wholly-commercial investor we sought to preserve all options for exiting the investment in the future.”
“These requirements understandably did not fit with the Government’s objective for the ownership of Kiwibank.”
Mr Whineray says as the NZ Super Fund matures it will continue to sell as well as buy investments in New Zealand, in line with its independent commercial mandate.
“We continue to work to identify suitable domestic investments that meet the Fund’s commercial requirements while delivering environmental and social benefits.”
The NZ Super Fund purchased its stake in KGHL from NZ Post in 2016 for $263m and invested a further $61.75m in 2017. The investment has earned the Fund a return of more than 10 percent per annum.
The NZ Super Fund has more than $8 billion invested in New Zealand, with substantial exposures to technology, financial services, healthcare, land and housing development, timber, rural land, listed equities and both small and large privately-owned companies.
Earlier this year, the NZ Super Fund announced it would partner with Copenhagen Infrastructure Partners to explore the potential for large-scale offshore wind energy in the South Taranaki Bight.
This is the announcement from Kiwibank:
Kiwibank today welcomed the news that it would remain in public ownership, with the Government announcing that, subject to regulatory approvals, it has acquired 100 percent of Kiwibank’s parent company Kiwi Group Holdings.
Chief Executive Steve Jurkovich said the announcement would enable Kiwibank, the biggest New Zealand-owned bank, to continue to deliver on its growth ambitions and have even more impact for its people, customers, and Aotearoa.
“The key to having a positive long-term impact is remaining focused on being competitive and balancing performance and purpose. The refreshed arrangements will ensure a continuance of good governance and ownership stability.
“Our success in two short decades since we opened for business is remarkable. Over one million customers and 40 thousand businesses have joined us because they want to bank with a New Zealand-owned bank where 100 percent of our profits stay right here in Aotearoa. But there’s a lot more we want to achieve.”
Mr Jurkovich acknowledged the investment and support of the departing shareholders – NZ Post since the bank’s inception in 2002, and ACC and the NZ Super Fund since 2016.
“Their contribution is a big part of our history, and they leave the bank in a strong position,” he said.
“We look forward to working constructively with the Government under our new ownership structure to deliver on our Purpose: Kiwi making Kiwi better off.”
Mr Jurkovich said the bank would continue to operate independently and at arm’s length from the Government, with its own Board.
He said customers didn’t need to do anything following today’s announcement, and they could take comfort that Kiwibank was here to stay for the long-term.
“We remain focused on providing expertise around the products and services that make Kiwi better off. We believe the stability and support offered by today’s announcement will strongly support our goal of being the first choice in banking for customers.”
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.