PNG competition regulator blocks Westpac Pacific sale

Papua New Guinea’s competition regulator has blocked the $420m sale of Westpac’s pacific business to Kina Bank.

Papua New Guinea’s competition regulator has blocked the sale of Westpac’s pacific business to financial services group Kina Bank. Picture: Christian Gilles/NCA NewsWire

Westpac’s plan to simplify its global banking operations has hit a major hurdle with Papua New Guinea’s competition regulator blocking the $420m sale of its pacific business to rival financial services group Kina Bank.

The rebuff comes more 10 months after Westpac announced the sale of its Pacific business — which includes Westpac Fiji and a 89.1 per cent stake in Westpac Bank PNG – to Kina.

The big four bank said it wanted to prioritise its Australian and New Zealand businesses and flagged a move to consolidate its international operations into three branches across Singapore, London and New York.

But the sale of the pacific business was always subject to approval from regulatory approvals in both Fiji and PNG.

Westpac on Tuesday confirmed PNG’s independent Consumer and Competition Commission had blocked the sale of its stake in the PNG business after flagging its intention to do so in a draft determination earlier this year.

“On 22 July 2021, Papua New Guinea‘s independent Consumer and Competition Commission (ICCC) released a draft determination indicating it proposed to deny authorisation to Kina Bank for the proposed acquisition of Westpac’s stake in Westpac Bank PNG Limited,” Westpac said in a statement to the ASX.

“The ICCC has now released its final determination confirming it has denied authorisation.

“Westpac acknowledges the ICCC’s determination and will continue to operate these businesses while it reviews the impact on the sale to Kina Bank.”

In a statement to both the ASX and the Port Moresby stock exchange, the dual-listed Kina said it had received a copy of the ICCC’s final determination, with the regulator saying it was not satisfied the deal “will not have, or will not be likely to have, the effect of substantially lessening competition in the PNG markets.”

The ICCC also said it was not satisfied that the transaction “will result, or will be likely to result, in such a benefit to the public that it should be authorised.”

Like Westpac, Kina said it was considering its options.

“Kina is assessing the implications of the ICCC’s decision not to grant authorisation to the Acquisition and is considering its options,” it said.

“Kina will update the market when there is further information to announce.”

Westpac Pacific had net assets of $580m at the end of September last year, net loans of $1.58bn, deposits of $2.34bn and risk weighted assets of $2.9bn. It generated cash earnings of $11m in the 2020 financial year.

Kina had net assets of around $1.35bn at the end of June. The original transaction would have seen payment to Westpac of up to $420m.

The sale price was 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 included earn-out payments of up to $45m over 24 months, which were subject to Westpac Fiji’s business performance over the period.

Westpac expected a $230m accounting loss on the sale, including a foreign currency translation reserve loss based on exchange rates at completion.