Kina Securities’ ambition to be the Macquarie of PNG after landing Westpac

Two years after he first contemplated buying Westpac’s PNG business, Kina Securities’ Greg Pawson got the deal over the line. There’s more to come.

Kina Securities last week announced the acquisition of Westpac’s PNG and Fijian businesses in a deal valued at up to $420m. Picture: NCA NewsWire / Gaye Gerard

Two years after he first contemplated buying Westpac’s Papua New Guinea business, Greg Pawson got the deal over the line — on better terms and with the addition of the big four bank’s Fijian operations. The acquisition was, in part, made possible by COVID-19, the Kina Securities boss says.

“Back in 2018, when we were talking to Westpac, they just wanted us to pay the full price. And that was it,” Mr Pawson told The Australian. This time around, not only was the bank’s Fijian business included in the deal, but Westpac was also more receptive to a structured transaction that required only part-payment upfront, he said.

“Were it not for COVID-19, I don’t think we would have been able to negotiate that type of structured transaction. But given the market conditions at the moment, they’ve been receptive to that,” Mr Pawson said.

“They’re ultimately getting a reasonable price for the business. It’s just structured in a way that that’s in our favour.”

Greg Pawson, CEO of Kina Securities.

Kina Securities last week announced the acquisition of Westpac’s PNG and Fijian businesses in a deal valued at up to $420m.

The sale price is made up of $315m payable at completion, and a further $60m to be paid on a six-monthly basis over the following 18 months.

It also includes earn-out payments of up to $45m over 24 months, which are subject to Westpac Fiji’s business performance over the period.

Speaking from a Brisbane hotel where he is part-way through a two-week quarantine, Mr Pawson said the inclusion of the Fijian business added to the appeal for Kina.

“Fiji is attractive to us because it gives us a little bit more diversification from a geographical perspective.

“It also gives us some optionality, particularly around infrastructure … so we think it’ll be a huge benefit for us and our digital strategy moving forward as well,” Mr Pawson said.

The ASX-listed Kina is hoping to leverage Fiji’s superior telecommunications infrastructure to benefit the rest of the business, with Mr Pawson flagging the potential move of all of its contact centres out of PNG and into Fiji.

“The cost of setting up those centres is actually very high in PNG. It’s also very difficult to source talent locally, particularly around information and communication technology (ICT).

“Fiji has a very competent talent pool in that particular industry sector, which is a huge advantage to us, given our underlying digital strategy,” he said as he cautioned on the impact such a move would have on PNG.

“It’s quite a sensitive (issue), because clearly, over time, that would be about potentially taking jobs from PNG and putting them in Fiji. We’re not suggesting that that’s something that we’ll do immediately, but it is something that we’ll be looking at in the future.”

It would be part of a three to five-year plan, he added. With ambitions for Kina to become the Macquarie Bank of PNG, Mr Pawson said the Westpac acquisition meant it was starting to scale up.

Over the medium to long term, he is eyeing a banking licence in Australia.

Already, he is taking a close look at expanding Kina’s fund administration platform offshore. He and his team had been speaking to a few small fund administration businesses in Queensland but nothing had eventuated from the discussions just yet, he said.

“Given we’re an ASX-listed company, it would be good for us to have a revenue stream in AUD, which makes it a bit easier to pay out dividends,” he said of the long-term expansion plans.

The Westpac deal comes just over a year after Kina completed the acquisition of ANZ’s retail, commercial and SME businesses in PNG.

More than 12 months in and Kina has gotten into “a really good operating rhythm” with the new businesses, Mr Pawson said.

“Our customer service standards have lifted significantly and I can confidently say our digital platforms in PNG are the best in market.”

While the ANZ migration took some effort, he sees the Westpac migration being a much easier process. He also expects his prior experience as a Westpac executive to be helpful with the transition.

“We have a number of ex-Westpac people in our business, not just from PNG, but from Fiji as well. That will make that whole cultural alignment piece a lot easier,” he said.

While his prior employment at Westpac will be an advantage for migrating the businesses and into the future, it didn’t give him any kind of an edge through the deal making process. In fact, quite the opposite.

“They were pretty tough to negotiate with. And there were a few other bidders in the market.”