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Kina Securities Westpac PNG Acquisition Blocked By Regulator

Westpac Banking Corporation may have to find another buyer for its disinvestment of Pacific businesses. It follows the declining by the Independent Consumer and Competition Commission (ICCC) in PNG of
15 Sep 2021 11:00
Kina Securities Westpac PNG Acquisition Blocked By Regulator

Westpac Banking Corporation may have to find another buyer for its disinvestment of Pacific businesses.

It follows the declining by the Independent Consumer and Competition Commission (ICCC) in PNG of Kina Securities Limited’s proposed acquisition of Westpac Bank-PNG-Ltd.

A 96-page document, outlining determinants and reasons behind the decision, was presented by Papua New Guinea’s ICCC yesterday, to justify its decision.

A six-page summary of the report explained the decision to decline approval for Kina Securities to buy 89.91 per cent of shares in Westpac Bank-PNG-Ltd.

Kina Securities planned to acquire Westpac operations in both PNG and Fiji.

Kina Securities said it was considering its options.

 

A statement from Kina Securities said it was assessing the implications of ICCC’s decision, not to grant authorisation to the acquisition.

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

“The decision to sell and who to sell to is Westpac Banking Corporation’s,” Reserve Bank of Fiji Governor, Ariff Ali, said.

RBF had conditionally approved Kina Securities’ application for a licence to conduct business in Fiji as a commercial bank through its wholly owned subsidiary, Kina Securities (Fiji) Pte Limited (KSF), on 19 February 2021.

The application was to effect the acquisition of Westpac Fiji, RBF earlier reported.

 

“The proposed acquisition of shares in Westpac PNG by Kina Securities Limited, is part of the overall proposal that Westpac Banking Corporation made to sell off its Pacific business,” the summary said.

Westpac Banking Corporation’s disinvestment of its Pacific businesses involved the sale of assets of Westpac Fiji, and 89.91 per cent of shares in Westpac PNG.

Westpac Banking Corporation had offered to sell its Pacific businesses to Kina Securities for A$420 million (FJ$643.64 million).

“The parties announced the sale of Westpac PNG and Westpac Fiji were independent and the completion of both transactions were intended to occur simultaneously,” the commission said.

Kina Securities applied for clearance and authorisation as required by PNG’s Independent Consumer and Competition Commission.

 

Rejected
The commission said the proposed acquisition was not in the best public interest.

The commission said the proposed acquisition would not lessen competition in the relevant markets.

It said the proposed acquisition would unlikely reduce competition in the retail banking sector.

The commission said the acquisition was unlikely to give market power to Kina Securities.

“It would create barriers to entry, in the way of increasing costs in setting up an adequate physical presence in PNG to compete effectively with the two remaining banks,” the commission said.

“The market power of the two remaining banks would allow them to extract higher rents by charging higher loan interest rates to businesses/individuals, and by paying a lower interest rate of return to depositors,” the commission said.

“Lower supply of loans would be associated with higher lending rates and would impede capital accumulation, and limited national economic progress.”

 

ICCC
ICCC commissioner and chief executive, Paulus Ain, said the coat-tail and the ability to do so in a highly concentrated market would be very strong and likely to override the incentive to compete.

In the absence of limited other competition from smaller, non-bank financial institutions (‘NBFIs’), he said the ICCC was concerned the proposed acquisition was likely to result in prices and profit margins increasing.

The commissioner said the number of commercial banks in PNG had reduced in recent years, following Kina Bank’s acquisition of Maybank in 2015, and its purchase of ANZ Bank’s PNG retail banking operation in 2019,

Mr Ain suggested Westpac could continue trading in PNG.

“Although Westpac has decided to divest its PNG business, it appears that this will not happen immediately without the proposed acquisition proceeding; hence the ICCC considers that Westpac PNG will be a significant source of competition for at least several years.”

 

Feedback: frederica.elbourne@fijisun.com.fj



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