Papua New Guinea’s Independent Consumer and Competition Commission (ICCC) has rejected Kina Securities Limited’s proposal to buy out Westpac Bank’s PNG operations.
The ICCC’s decision reflects its concerns about the effect on competition in the PNG market, stating it is not satisfied that the proposed acquisition “would not have, and would not be likely to have, the effect of substantially lessening of competition in the relevant markets.”
A statement by ICCC Commissioner and CEO, Paulus Ain goes on to say that the Commission “is also not satisfied that the Proposed Acquisition will result, or will be likely to result, in such a benefit to the public that it should be authorised.”
Had the acquisition gone ahead, PNG’s second and third largest banks would have been amalgamated, increasing Kina’s reach from a mere 165,000 customers to more than half a million. This would however have left PNG with just two commercial banks, Kina and the larger BSP.
The sale of Westpac Fiji and Westpac’s 89.91% stake in the PNG operation to Kina Securities for an estimated AUD$420 million (US$310 million) was subject to regulatory approval in both Fiji and Papua New Guinea. Fiji has already granted that approval.
Westpac and Kina Securities Limited have acknowledged receipt of the ICCC’s final determination.
Westpac has told the Sydney Morning Herald that it “will continue to operate these businesses while it reviews the impact on the sale to Kina Bank.”
Likewise Kina says it is assessing the implications of the ICCC’s decision and is considering its options according to a media release from CEO Greg Pawson and CFO Chetan Chopra.
ASX-listed Kina says it will update the market when there is further information to announce.
The proposed sale was part of Westpac’s strategy to simplify its operations and focus on banking in Australia and New Zealand.
Kina sought to leverage Westpac’s reach and customer base to challenge the Bank of South Pacific’s (BSP) dominance in the PNG Banking sector, with CEO Greg Pawson telling Islands Business earlier this year that the PNG purchase would give them access to the corporate market. BSP currently holds some 70% of the lending market in PNG.
Fiji’s banking regulator is the Reserve Bank of Fiji, and Governor Ariff Ali said neither RBF nor the Competition and Consumer Commission of Fiji have any major issues with the Fiji part of the proposed acquisition. However Ali says “it is now up to Westpac to determine if it wants to decouple the sale and sell its Fiji operations separately”.
That is likely to be a less attractive proposition for Westpac.
Competition in Fiji’s banking sector is fairly robust, with six banks operating; ANZ, BSP, Bank of Baroda, HFC, Bred Bank and Westpac.
“As far as we are concerned, Kina met our licencing conditions with the exception of a few minor requirements which they are currently addressing”, said Ali.
With its Pacific exit somewhat delayed, Westpac will continue to manage its network of banks across PNG and Fiji while it tests the market for a new buyer. It is understood the earlier bids included the France’s BRED-Banque Populaire, and PNG institutions NasFund and Credit Corp.