Senator the Hon Mathias Cormann
Minister for Finance
Date: Monday, 20 October 2014
SRI JEGARAJAH: A $4 billion IPO set to hit the market, making it potentially the biggest State listing in about two decades. Matt Taylor has been following the story and joins us now from Sydney, Matt.
MATTHEW TAYLOR: Hi Sri, yes, ever since that 1997 listing of some of Telstra in terms of the Medibank Private IPO is what we are talking about right now. We got those details out in the prospectus today showing that as much as in fact $5.5 billion Australian could be raised through this float. Of course the Government is selling off its 100 per cent interest in this private health insurance business. The indicative range between $1.55 to $2 a share, but the price is capped at $2 for retail investors. In terms of when we are expecting the company to hit the boards of the ASX, that has been flagged for the 25th of November. Let's get more now and bring in the Australian Finance Minister Mathias Cormann joining us now live from Canberra. Senator, thanks very much for joining us today.
MATHIAS CORMANN: Good to be here.
MATTHEW TAYLOR: First up I just wanted to ask you what the demand has been like out there? How's the IPO being received because the prospectus just released today.
MATHIAS CORMANN: Well we have just gone through a pre-registration process where people across Australia could pre-register their interest in a Medibank Private Share Offer prospectus and with more than 750,000 Australians pre-registering their interests that well and truly exceeded our expectations. All of our research as well as that particular pre-registration process all indicated that there is a very strong interest in the Medibank Private Share Offer.
MATTHEW TAYLOR: But that interest was only about 15 per cent of the 1.8 million Medibank Private members. Wasn't that a bit disappointing to be at that lower end of 1.8 million people I guess?
MATHIAS CORMANN: Well not at all. If you compare it to the general population essentially more than a third of the interest came from Medibank Private policy holders. More than a third of the pre-registrations came from Medibank Private policy holders, which is significantly more than from the general population. The truth is just because somebody takes our private health insurance doesn't necessarily mean that they are an investor. Even so, the proportion of Medibank Private policy holders compared to the general population that have expressed an interest in being a part of the future of Medibank Private through this share offer is quite significant and we have been very pleased with the level of interest.
SRI JEGARAJAH: Minister, Medibank isn't carrying any debt right now but do you think that will change post privatisation? And are you going to get any visibility on whether it may go on the acquisition trail?
MATHIAS CORMANN: Well that is really a matter for the Medibank Private Board post privatisation. What we have said is that one of the benefits of selling Medibank Private, which is a commercial business operating in a well functioning, competitive market now. One of the benefits of selling Medibank Private and getting it into private ownership is that it will have more flexibility to operate as a genuinely independent commercial business, including having more flexibility to access capital markets and pursue future growth opportunities as Medibank Private sees fit at any particular time.
MATTHEW TAYLOR: I just want to touch on the pricing a little bit. The indicative range coming in between at around $1.55 to $2 Australian per share. But if you look at the price to earnings ratio on that, it is about 16.5x to 21.3x. You're not concerned it may be a little bit too expensive for some retail investors?
MATHIAS CORMANN: Well if you compare it to other publicly listed private health insurers or private health care businesses you will see that it is exactly within the range. The most recent health care related IPO, Healthscope here in Australia came in at 21.9 PE. We have as you have indicated priced it at an indicative price range of 16.5x to 21.3x PE. Obviously, the market will determine ultimately what the real value is. We have given it an indicative price range. The final price could come in within the range, above the range or below the range. We are now going through this process and let's see what happens.
MATTHEW TAYLOR: Alright, the 25th November is when you have flagged that the shares will of course start trading on the ASX. Is that set in stone or what could derail any type of listing on that particular date?
MATHIAS CORMANN: What we've said all the way through as we've embarked on this process and again today is that we will continue to monitor market conditions and from where we sit right now today, we are committed to selling 100 per cent of Medibank Private through this IPO. But of course, unexpected events can happen and we're keeping that flexibility to make judgments ultimately every step along the way in this process on whether it is responsible to keep proceeding as envisaged depending on market conditions.
SRI JEGARAJAH: Minister is this IPO expected to attract much overseas interest and just allied to that, is there any cap on foreign ownership of this issue?
MATHIAS CORMANN: We do believe that there will be significant interest both domestically and overseas. We are progressing this sale through the Medibank Private Sale Act which was passed by the Australian Parliament in 2006 and there is a cap, not on foreign ownership, but there is a cap on the level of ownership that any individual investor is able to acquire. That is a 15 per cent cap for any individual investor, which will remain in place for a five year period post listing.
SRI JEGARAJAH: I know this is a little bit speculative but I'm going to try anyway. I know there is a $2 price cap but do you think that this IPO, judging on the interest you've received so far will price above the indicative range Minister?
MATHIAS CORMANN: I'm not going to pre-empt what the outcomes of the process are going to be that we are now engaged in. The IPO is all about determining the market value of Medibank through a book build process with institutional investors. That is what will help us determine the final market price for the shares in Medibank Private.
SRI JEGARAJAH: Sir thank you very much indeed for joining us today. Mathias Cormann there, the Finance Minister of Australia.