Transcripts → 2014


Press Conference - Medibank Private Share Offer

Senator the Hon Mathias Cormann
Minister for Finance


Date: Sunday, 23 November 2014

Medibank Private Share Offer, 2014-15 Budget

MATHIAS CORMANN: Good morning everyone. I am pleased to announce that the Medibank Private Share Offer has been successfully completed, with 100 per cent of the Medibank Private shares on offer sold. 

The Offer has generated a very high level of demand both from domestic and offshore institutional investors and, as a result, the Government has determined a final price for Medibank Private shares of $2.15 per share for institutional investors. Consequently, the price paid by retail investors is $2.00 per share, consistent with the retail price cap announced with the release of the prospectus. This represents a 15 cent or 7 per cent discount for retail investors to the price payable per share by institutions. 

There were about 440,000 individual applicants in the Retail Offer. 60 per cent of the Offer has been allocated to the Retail Offer and 40 per cent has been allocated to the Institutional Offer. Eligible Medibank Private and ahm policyholders have been allocated 33.2 per cent of shares allocated under the Retail Offer excluding the Broker Firm Offer.

Given the significant interest in the Offer by retail investors, the Government has instituted a scaling policy to ensure that all applicants under the General Public Offer, Policyholder Offer and Employee Offer have been allocated shares. Scaling of the General Public Offer, Policyholder Offer and Employee Offer has been applied on a progressive basis, with applications for larger parcels of stock being scaled back to a greater extent than applications for smaller parcels.  

More than half of General Public Offer, Policyholder Offer and Employee Offer applicants will receive at least 80 per cent of their application.  More than three quarters of these applicants will receive more than half of their application. 

No retail investor in the General Public Offer, Policyholder Offer or Employee Offer has been allocated less than the minimum application size of $2,000. Excluding Broker Firm applications, more than half of applicants in the Retail Offer received at least 80 per cent of their application, with more than three quarters of applicants receiving more than half the shares they applied for as I have previously indicated.

As was disclosed in the Medibank Private Share Offer prospectus, this scaling policy has provided for preferential allocations to eligible Medibank Private and ahm policyholders, as well as Medibank employees and those individuals who pre-registered their interest in the Share Offer. The Government has also exercised its right to claw back a further 20 per cent of the shares previously allocated to the Broker Firm Offer. The final allocation to eligible Australian and New Zealand brokers who bid for a firm allocation of shares on behalf of their retail clients is $1.2 billion. We have also sought to establish a balanced share register for Medibank Private as it commences its life as a listed entity.

Medibank Private will list on the Australian Securities Exchange at 12:00 noon on Tuesday, 25 November 2014. The listing of Medibank Private on Tuesday will mark the successful implementation of a long standing Coalition policy. It will contribute to an efficient, competitive and viable private health insurance market here in Australian. 

I would like to thank the team in Finance lead by Jan Mason and John Edge who have done an outstanding job in assisting the Government in implementing this sale in an orderly and methodical fashion. I would also like to thank the JLMs and our own business advisers and all of the other advisers that have contributed to this process and to this outcome. Very happy to take some questions.

JOURNALIST: So to what extent has that final price surpassed your expectations?

MATHIAS CORMANN: As you would recall, when we released the Prospectus, we released an indicative price range of $1.55 to $2.00. The interest was very, very strong. We always indicated that ultimately it would be the market who would determine the value of Medibank Private. The market has determined the value of Medibank Private through a book build process, which was conducted this past week over two and a half days, and this is the price that the market has determined. Any other questions?

JOURNALIST: Do you think the retail shareholders will be better off over the long term, given the high value of the float price?


JOURNALIST: Do you think the retail share holders will be better off in terms of the value of their shares over the medium to long term compared to the quite high price that it has been floated at?

MATHIAS CORMANN: Well it has been priced where the market has priced it at. The market has determined the value of the Medibank Private shares. The book-build process of course which involves large institutions who are well informed, who are well researched in terms of what the appropriate value is, obviously they have made a judgment that $2.15 per share is the appropriate value for Medibank Private shares right now. Now in terms of the performance of the share price into the future, that is going to be a function of the performance of the company into the future, the performance of the market more generally into the future and I am not going to speculate on how the stock market in relation to this or other stocks is going to perform into the future. But right now Medibank Private has been valued at $2.15 per share through a very thorough and robust process seeking to identify what the market value actually is.

JOURNALIST: Some commentators on the market have speculated that the company is not so much a radical growth prospect but more of a cost cutting exercise, a search for a leaner structure. What is your take on that?

MATHIAS CORMANN: I am not going to be a commentator on all these things but the truth is that Medibank Private is a good business, it is a very well known brand, it is the largest private health insurance business in Australia, covering 3.8 million Australians and so there is lots of opportunity. We have always said that we believe that into the future that Medibank Private in private ownership will be able to perform better than in public ownership. Principally because they will be more flexible in pursuing growth opportunities into the future, they will have better access to capital markets and they will have opportunity to perform and to do the best they can without having the restrictions of Government ownership imposed on them. So from our point of view, we think this is a win for Medibank Private policyholders because they will have a company providing services to them that will be able to perform even better than they have so far. And it is a win for Australian taxpayers because Australian taxpayers have been able to release the capital that was tied up in Medibank and we are in a position now to be able to reinvest that capital in job creating, productivity enhancing infrastructure to grow a stronger and more prosperous economy.

JOURNALIST: Will all that capital be reinvested into the Asset Recycling program or will some of it go into general revenue?

MATHIAS CORMANN: No, it will not go into general revenue. This is a capital asset that we have sold. And we have said right from the word go that the intention of the Government would be to reinvest the capital released from the sale of this asset into job creating, productivity enhancing infrastructure through our Asset Recycling initiative. That is a central part of our Economic Action Strategy to build a stronger, more prosperous economy and that is what we will be doing, consistent with the announcements at Budget time and since then.

JOURNALIST: Just with regards to the scoping studies for potential privatisations: Australian Hearing, Defence Housing Australia, Royal Mint and ASIC registry services, has any decision been made and if so, was there any sort of indicative timeline?

MATHIAS CORMANN: No, as we have said when we announced those scoping studies, we will consider the findings of those scoping studies in the context of the 2015-16 Budget. The 2015-16 Budget has not been finalised yet. If you recall, we announced the scoping study into the potential sale of Medibank Private at that time in October last year. We then considered the findings of that scoping study and in the context of the 2014-15 Budget made a decision to progress and to go ahead with that sale. What we are now announcing today is the successful completion of that process. But in relation to these other scoping studies that are underway no, the Government has not made any decisions, in fact we have not yet received those scoping studies. But they will be considered in the context of the preparation of the next Budget.

Have we got some people on the phone? I think one in the room, and then we will go to the people on the phone.

JOURNALIST: Senator, Senator Leyonhjelm has said this morning on Insiders that he hasn’t heard from the Government for quite some time about the $7 GP co-payment issue. Why is that? Is that something you are still seeking to win support in the Senate for? 

MATHIAS CORMANN: Very happy to go into other issues, but obviously this morning is about the sale of Medibank Private so I would like to just conclude that before we go into other issues. We might just take somebody on the phones.

JOURNALIST: I was just wondering what the total sales price for Medibank Private is?

MATHIAS CORMANN: The total sales price as per the press release?

JOURNALIST: The total price of Medibank Private? How much money is being raised from the privatisation?

MATHIAS CORMANN: $5.679 billion. Have you got a copy of the press release?

JOURNALIST: Not yet, no.

MATHIAS CORMANN: Okay, well it is $5.679 billion. Next question?

JOURNALIST: I have just got two little ones. Was $2.15 on the institutional book build the maximum price at which you cleared the stock? Or have you in fact taken less and strengthened the aftermarket as a result? And also there was some conversation about what the mix of overseas and local institutional investors would be, so can you tell us what the mix is?

MATHIAS CORMANN: Yes, so $2.15 is the highest price that we could achieve with the offer, the institutional offer, appropriately well covered. That is why we determined that $2.15 was the appropriate price. In terms of the share between domestic and offshore institutional investors, domestic institutional investors have received 22.9 per cent of total shares and offshore institutional investors have received 17.1 per cent of total shares.

JOURNALIST: Alright, thank you.

JOURNALIST: Good morning.  If $2.15 is the highest price that you could achieve with the institutional round appropriately covered, are you worried about what the shares will do on opening day?  It sounds like maybe there might not be sufficient demand in the aftermarket.

MATHIAS CORMANN: $2.15 is the price the market determined should be charged for Medibank Private shares as a result of the process we went through. Of course what happens on the stock market on Tuesday, I'm not going to speculate on that. There will be a whole range of factors that will play into this and let's see what happens.

JOURNALIST: Could I just ask on the split between local and international funds?  Some of the local fund managers are suggesting that international funds were maybe prepared to pay a little bit more.  Can you give us any colour around how the local and international funds bid into the book build?  Was there a clear difference there?

MATHIAS CORMANN: The process was pretty well uniform. The way the book build works is that different institutions made bids at different price points and at $2.15, the share between domestic and overseas investors, institutional investors, was 54/46 so there was a stronger demand at $2.15 with domestic investors, institutional investors, than overseas institutional investors. Next question?

JOURNALIST: Just on the split between retail and institutional investors, could you just explain how you arrived at that and whether reducing the allocation to institutional investors - does that push up the share price?

MATHIAS CORMANN: The 60/40 split is consistent with what has happened with similar privatisations in the past and given the very strong retail demand, we felt it was appropriate to allocate 60 per cent to mums and dads across Australia to ensure that they can appropriately share in the future of Medibank Private and 40 per cent was consequently what remained available for institutional investors. 

JOURNALIST: Hi Minister, I was just wondering if you can confirm the number of shares that were sold?

MATHIAS CORMANN: Yes, it was about 2.7 billion. And there is a few numbers at the back of that. About 2.7 billion shares.

JOURNALIST: Okay, thank you.

MATHIAS CORMANN: So no more questions in relation to Medibank? Happy to go to your question sir. So when it comes to the implementation of the Budget, what the Government has been doing since May is progressing that implementation in an orderly and methodical fashion. We have, given that the Government hasn’t got a majority in the Senate, whenever Labor and the Greens are opposed to a particular measure, we have of course engaged with the cross bench in order get as much of our Budget through as efficiently as possible. Now we have done that in a prioritised and sequential way. There are some measures that come into effect sooner than others. Our first priority when the Senate changed on 1 July was to get the Carbon Tax repeal through, to get the mining tax repeal through, to get the removal of all of the unfunded promises that Labor attached to the mining tax through which of course achieved about $10 billion in savings from the mining tax repeal. We have also progressed a number of savings measures in the Social Services portfolio. What we are doing right now is continuing to progress the implementation of Budget measures in an orderly and methodical fashion, bearing in mind that the Government, like other Governments in the past, does not have a majority in the Senate.

JOURNALIST: Why then hasn’t Senator Leyonhjelm heard from the Government from some time? Do you have other alternatives to get this through?

MATHIAS CORMANN: We are working in an orderly and methodical fashion and we're prioritising the measures that we progress.  This particular measure does not come into effect until 1 July 2015 so compared to other measures where there was a higher degree of urgency to get them dealt with by the Senate of course we've prioritised some of these other measures, in particular measures in the social services field, measures related for example to fuel excision indexation and the like.  They were measures that had to be dealt with first and of course over the next sitting fortnight we will continue to progress further budget measures and we look forward to the senate supporting as many of them as possible. 

The only reason the cross bench in the senate is relevant in any of this is because the Labor party continues to be in complete denial about the state of the budget they left behind.  The Labor party left behind a debt and deficit disaster. Bill Shorten was a senior member of the government that not only delivered $123 billion in projected deficits in its last budget but he also was a senior member of the government that was putting Australia on track for $667 billion worth of debt within a decade and rising beyond that, forcing us to pay more than $1 billion a month now on interest to service the debt that they have accumulated. But instead of being part of the solution, Bill Shorten continues to oppose most of our budget repair measures.  He even is opposing Labor savings.  He doesn't even have the strength to convince Labor to support their own savings which they initiated, which they banked in their last budget but failed to legislate themselves. So here we are trying to progress the savings measures that Labor themselves initiated and under Bill Shorten's leadership Labor is even more reckless, more irresponsible when it comes to the state of our budget than they were under Julia Gillard and Kevin Rudd.

JOURNALIST: Are the Higher Education reforms a priority for the Government? Is that something that you would want to legislate this year?

MATHIAS CORMANN: All of the measures that we announced in the budget are priorities for the Government and we will implement them in an orderly and methodical fashion.  Whenever we can achieve common ground and achieve a majority in the senate for one of our important structural reforms we will do so.

JOURNALIST: Are you still committed to the Higher Education Reforms?

MATHIAS CORMANN: We are absolutely committed to every single measure that is in the Budget, in particular our Higher Education reforms, very important reforms.

JOURNALIST: Have you got a clear time-frame in mind to progress the GP Co-payment? 

MATHIAS CORMANN: The GP co-payment is due to come into effect by 1 July 2015 so obviously we would have to have it passed by 1 July 2015 in order to implement that measure in an appropriate way.

JOURNALIST: Is there any other way of getting this policy in place? Through regulations or perhaps you need to soften it to get it through?

MATHIAS CORMANN: I’m not going to speculate. The measures are as they were announced in the Budget. The Government is focused on implementing the Budget measures as they are announced in the Budget. If that ever were to change, relevant announcements would be made at that time. Thank you very much everyone.