Fran O'Sullivan: NZ Post a brilliant Wellington deal

This is a Wellington deal that brilliantly suits the objectives of two finance ministers, current and former.

At first blush it looked as if the $495 million Kiwibank proposed partial sale could have been cooked up by NZ Post chairman Sir Michael Cullen and Bill English, his successor as Finance Minister, over a whisky or three in late night Beehive discussions.

Nothing is ever so naked, of course.

There is a way to go before any celebration can take place.

But English had no hesitation in naming Cullen when I questioned him last night on Newstalk ZB's business hour as to who was the architect of the deal. "Sir Michael", he replied.

NZ Post will get 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). And two current political headaches get kicked well down the track to be dealt with by succeeding finance ministers.

The key question is whether this is simply a medium-term fix.

It does not address NZ Post's long-term ownership issues. NZ Post is subject to digital disruption. The postal part of the business could have been sold outright to rival logistics companies.

But the deal - when consummated - will ensure some $150 million to $200 million is injected into the business and provide CEO Brian Roche with much needed capital to revitalise the business. This will enable NZ Post to invest in its core parcels, packages and letters business and pay down debt.

In lengthy discussions between Cullen and NZ Post's shareholding ministers - English and SOE Minister Todd McClay - various options to provide both NZ Post and Kiwibank with capital were explored.

There is an elegant symmetry to the $495 million indicative offer that finally emerged from the NZ Superannuation Fund and the Accident Compensation Corporation, which have put forward a proposal to acquire 45 per cent of Kiwibank.

ACC has been circling for some time. It is only recently that the Super Fund, which now numbers some experienced bankers on its board, has stepped up.

Their indicative offer values Kiwibank at $1.1 billion.

This is a sufficient discount to the market price that could have been achieved in an open bidding war to offset any surprises that may emerge when the tyre kicking has taken place and any caveats which have currently been placed on the final bid price.

Any issues about the retention or otherwise of the government guarantee which Kiwibank enjoys are a red herring. Anyone who thinks otherwise hasn't heard of the BNZ or South Canterbury Finance.

Kiwibank is still on the Government's books --it's now got three Government-related shareholders instead of one.

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