Fran O'Sullivan: Bank deal aligns politics and finances

The NZ Super Fund wants it known that it has not been under any political direction to buy Kiwibank shares. Photo / Richard Robinson

The NZ Super Fund wants it known that it has not been under any political direction to buy Kiwibank shares.

It operates independently and at arm's length from Government.

Most informed people would accept that.

But the fund has been a little too precious when reacting to the raft of opinion from editorial writers and columnists who have focused on the obvious political utility that surrounds NZ Post's decision to entertain a $495 million indicative offer for 45 per cent of Kiwibank (NZSF 25 per cent and ACC 20 per cent).

It wouldn't have taken an Einstein - or for that matter a Beehive politician - more than a nanosecond to read the obvious semaphore in the Super Fund's 2011 summary of its investment strategies. The fund is clearly on the prowl for direct investments in New Zealand - including Crown or state assets - within a 20 per cent-50 per cent ownership band and above a $100 million threshold.

This was an open invitation to the Government and state-owned enterprises (SOEs) that are looking to introduce new shareholders (outside of a partial privatisation that for reasons of political ideology will not fly) or simply to disgorge assets, to do business.

Hence, the fund's decision to try to buy a 25 per cent stake in Kiwibank from NZ Post should not be any surprise.

The deal suits the objectives of the Government, NZ Post and Kiwibank, both financial and political.

NZ Post gets recapitalised, Kiwibank gets two additional and well-heeled shareholders and the Government gets a nifty, one-off special dividend of $300 million to $350 million which will help its books (and indirectly boost its chances of posting Budget surpluses).

Irrespective of the Super Fund's position, politics is certainly at play.

Finance Minister Bill English on NewstalkZB said earlier this week he is looking to extract a $300 million-$350 million special dividend from NZ Post's sale of a 45 per cent stake in Kiwibank. NZ Post chairman Sir Michael Cullen has indicated the SOE would like to retain much more than the remaining balance from the $495 million indicative offer.

The NZ Super Fund's decision to try to buy a 25 per cent stake in Kiwibank from NZ Post should not be any surprise.

This is a negotiation that is to some extent playing out in public.

There is a round of tyre-kicking to come before the offer for Kiwibank shares is finalised.

Cullen has suggested that the proposed share sale is not the end of the process, hinting that NZ Post's holding may yet be diluted further.

The Government has made it clear that it has no current intention of redeploying any of the special dividend towards bolstering Kiwibank's own capital.

The word from English's office is that Kiwibank's future capital needs are up the board to decide " which would include ACC and NZSF if the proposal goes ahead.

The extent to which NZ Post needs to participate would be discussed with the shareholding Cabinet Ministers.

What is even more interesting are English's hints that he sees the Kiwibank play as an template for other assets shuffles within the "Crown" portfolio.

Keep a watch out for some of Landcorp's farms and other SOE assets.

Again - this is not suggesting political influence is at play.

But simply an alignment of interests.