Senator the Hon. Mathias Cormann
Minister for Finance
Date: Wednesday, 26 March 2014
Following careful consideration of the scoping study the Government has decided to progress the sale of Medibank Private through an initial public offering.
This provides the best option for the Government to achieve its objectives for a sale, which are:
- to contribute to an efficient, competitive and viable private health insurance industry;
- to maintain service and quality levels for Medibank customers, including in regional and rural Australia;
- to ensure the sale process treats Medibank employees in a fair manner, including through the preservation of accrued entitlements;
- to minimise any post sale residual risk and liabilities to the Government; and
- having regard to the above objectives, to maximise the net sale proceeds from the sale.
Subject to market conditions, Medibank Private will be sold through an initial public offering in the 2014-15 financial year.
The precise timing and structure of the initial public offering are yet to be determined.
The independently prepared scoping study reaffirmed our long-held view that there is no compelling reason for the Government to own Medibank Private.
Medibank Private is a commercial business operating in a well-functioning, well-regulated competitive private health insurance market with 34 competing funds.
There is no market failure in the health insurance market.
The scoping study found no evidence that premiums would increase as a result of the sale of Medibank Private. As it does now, Medibank Private will need to continue to compete against other funds for policyholders and will need to continue to comply with relevant regulatory requirements around changes in premiums.
The sale of Medibank Private will remove the inherent conflict currently in place where the Government is both the market regulator and the owner of a large participant in the market.
The Government will now proceed to the next stage of preparing for the initial public offering.
This includes the appointment of joint lead managers and other relevant appointments.
As part of the preparation for sale and as Medibank Private transitions to new ownership, the Government has decided to appoint three new board members to ensure a continued balance of skills on the Medibank Private Board in the lead up to privatisation.
Mr David Fagan, Ms Linda Nicholls AO and Ms Christine O’Reilly will commence as members of the Board on 31 March 2014.
Mr Fagan is a highly experienced banking and major projects lawyer with Clayton Utz. He will provide additional commercial legal expertise to the Board.
Ms Nicholls is a corporate adviser and a Director of a number of leading companies and organisations including KDR (Yarra Trams), Sigma Pharmaceutical Group and Fairfax Media. Her experience will complement existing commercial and health expertise on the Board.
Ms O’Reilly is currently a Director of CSL, Transurban, Energy Australia and Baker IDI and a Deputy Chair of Care Australia. Her diverse and extensive financial and operational experience will be highly valued by the Board.
I would like to thank retiring Board members, Professor Leanne Rowe AM and Mr Steve Vamos for their outstanding contribution to the Medibank Private Board over a number of years.
I also thank the scoping study advisers for their thorough and professional work.
Karen Wu - 0428 350 139