Last week Kiwi Group Holdings (KGH) owned up to the open secret that its prime wealth management asset was in play.
KGH confirmed Goldman Sachs as the investment bank charged with driving “the process of assessing possible options for the sale of Kiwi Wealth”.
The “time is right to test market interest” in Kiwi Wealth, the KGH statement says in sentiments attributed to board chair, Paula Rebstock.
But why now?
According to KGH spokesperson, the more than $9 billion KiwiSaver and wealth management firm “has attracted unsolicited buyer interest for some time”.
“As a prudent manager of a portfolio of assets, we assess the performance and strategic fit of our assets from time to time, with a view to ensuring we and the individual assets themselves are best positioned for the future,” the spokesperson said. “One of the key drivers of this process is to look at all the options with a view to best enabling Kiwi Wealth to continue to grow and realise its full potential.”
It is understood the Kiwi Wealth move – that follows quickly on the back of KGH divestments of its insurance arm and US share-trading platform, Hatch – was placed also under urgency on the back of shareholder exit plans.
In particular, industry insiders suggest the Accident Compensation Corporation (ACC) fund is keen to offload its 22 per cent share of KGH now its lock-in period has expired. ACC along with the NZ Superannuation Fund (NZS) acquired a collective 47 per cent of KGH in 2016 from then sole owner, NZ Post, for a total $494 million.
Under the agreement terms, the NZ government has first right of refusal of any KGH shares, putting pressure on it to either throw in more taxpayer money, allow ACC to sell on the open market or raise the capital through asset sales.
Finance Minister Grant Robertson said this February that government “and officials are currently considering the best ways for the Crown to express its ownership interest [in KGH]”.
And while a partial float of KGH, which boasts Kiwibank as its major asset, has been touted as one solution, the now official Goldman Sachs sales process indicates Kiwi Wealth wouldn’t be included in any listing.
KGH would not confirm or deny if it had issued a formal information memorandum for the sale of Kiwi Wealth.
“This is a confidential process and the details of that process are limited to those who are directly involved,” the spokesperson said.
To date, no potential buyers have come to light but it is understood some offshore parties are interested, which may put the NZ government in an uncomfortable position.
It’s not clear if the government has any veto power on the Kiwi Wealth sales process but the business “operates at arm’s length from the Government and Ministers are not directly involved in its operations”, according to the spokesperson.
Rebstock was also coy about the KGH timeline, noting “there is no predetermined outcome to this process and the status quo remains an option”.
However, ongoing ownership uncertainty is never good for staff morale, especially in an organisation that has seen high executive turnover in recent years. Kiwi Wealth may also struggle to recruit – for instance, the group has yet to confirm a permanent chief investment officer – until the issue is resolved.
“Enabling Kiwi Wealth to continue to grow and realise its full potential is a key driver of the process we are undertaking, and this in turn would help in attraction and retention of staff,” the spokesperson said.
Either way, a quick sale or return would make sense. Buyers looking for Kiwi investment shops might also have more choice soon with a couple of rumoured deals in the offing.