Transcripts → 2014


Transcript - Sky News Business Trading Day

Senator the Hon Mathias Cormann
Minister for Finance


Date: Monday, 20 October 2014

Medibank Private Share Offer prospectus

JOURNALIST: Joining us live, fresh off the back of the media conference about the Medibank Share Offer, prospectus release this morning. Mathias Cormann, the Finance Minister joins us, Minister thank you very much for your time this morning on the channel. We watched markets very closely on Sky News Business and our viewers know that the market volatility from the past week has shown risk-aversion is out there again. Investors are shifting, I'm just wondering how much this volatility has impacted on the final price of $1.55 to $2.00.

MATHIAS CORMANN: Well it hasn't because we've been receiving very strong support including very strong interest from retail investors, more than 750,000 Australians pre-registered their interest in the Medibank Private Share Offer during the pre-registration period. If you look at the performance of health care and health insurance related stocks in recent times, I mean we're very confident that we will be able to have a successful IPO with Medibank Private.

JOURNALIST: Although you have been in some ways cautious, or you are reserving the right to still respond to market conditions from this point aren't you?

MATHIAS CORMANN: Well that is the responsible course of action of course because we never know exactly and precisely what the future might hold but from where we stand here today, our intention is to sell down the entire Government shareholding in Medibank Private, to sell 100 per cent of Medibank Private. But obviously, you know, depending on what might happen in the future in terms of unforeseeable events then we do reserve the right to make the necessary decisions.

JOURNALIST: So perhaps some nail-biting between now and November 25th. On that pricing, the sense that I'm getting and of course it's very initial at this stage, the sense that I'm getting is that $1.55 sounds pretty reasonable but $2 seems a bit more of a stretch, maybe that's more on the expensive end. How did you actually come up with the price? What did you look at to price Medibank with your advisors?

MATHIAS CORMANN: Well it is entirely based on advice of course from experts who have researched the market, researched the level of retail and institutional interest and of course who have looked at comparable businesses in the market place. If you look at the recent health scope IPO, that actually went at 21.9 PE and obviously by putting it in at the range that we have, we think that we've put it into an indicative range that is quite realistic.

JOURNALIST: Is part of the aim though in the Government sell down , I mean ultimately you want to see the share price rise on debut, don't you? Have you left enough room for that?

MATHIAS CORMANN: Well we want shareholders to be satisfied with their purchase after they've made it. We want them to be able to achieve good returns on the back of a strong performance by Medibank Private into the future for sure. Pricing takes a whole range of factors into account, it is based on the research conducted by the experts which takes into account the level of retail interest, it takes into account the performance of the after-market, it takes into account the level of institutional interest and of course it takes into account the current trading of comparable publicly listed businesses in health care and in health insurance.

JOURNALIST: And I know that you have in the last couple of weeks tried to reassure policy holders that the privatisation is not going to lead to higher premiums. I imagine you're trying to sticking that line but there really is no guarantee from the Government that that's the case is it?

MATHIAS CORMANN: The truth is; the absolute truth is that the ownership of Medibank Private has got absolutely no relevance to the level of premium because Medibank Private operates as a commercial business now. It competes as a business for customers in the private health insurance market now, with 33 other private health funds and of course premium setting is regulated. Neither of those two factors will change. After privatisation Medibank Private will continue to compete for business with 33 other health funds and premium settings will continue to be regulated, so from that point of view it is business as usual. We can certainly guarantee that the sale in itself will not put any upward pressure of premiums. Don't take my word for it, none other than the ABC Fact Check, hardly an apologist for the Government, have scrutinised that claim that we've made and they've come back with an assessment to say we're on the money.

JOURNALIST: Alright and I know you do have to go Mathias Cormann, but one final question I guess, this is a very big asset sale, the indicative pricing or the indicative market cap could be $5.5 billion worth. What is the promise to tax payers about what you do with that money and whether you're looking at other sales in order to continue the fundraising?

MATHIAS CORMANN: Well what we have said is that we would reinvest the proceeds from the sale of Medibank Private into job creating, productivity enhancing economic infrastructure. And of course this is the first sale. We've long been committed to the sale of Medibank Private because we don't believe that in 2014 the Federal Government should be owning and running a private health insurance business. Of course there are other scoping studies that we announced as part of the last Budget. We are running scoping studies right now to assess the opportunities for sale of Defence Housing Australia, the ASIC Registry Services and we are also conducting scoping studies into Hearing Services Australia and into the Royal Australian Mint.

JOURNALIST: Fantastic, thank you Finance Minister Mathias Cormann. We will let you go, I know it's busy for you. Thank you very much for your time today.

MATHIAS CORMANN: Always good to be here.