Australia hopes to raise up to A$5.51 billion (US$4.82 billion) through the sale of the nation’s largest health insurer in an initial public offering (IPO), Minister of Finance Mathias Cormann said yesterday.
The conservative government confirmed in March that Medibank Private Ltd would be sold as it seeks to offload assets to raise funds to reinvest in infrastructure.
Australia’s Coalition government, led by Australian Prime Minister Tony Abbott, is cutting spending and selling assets as it seeks to rein in a budget deficit that swelled to A$48.5 billion in the year ended June 30.
Stock volatility has surged since the government announced some details of the IPO on Aug. 29, with more than US$5 trillion being wiped from the value of global shares amid concern economic growth is slowing.
The government has been carefully monitoring markets and has the flexibility to adjust the size of the offering if there is a sudden deterioration in sentiment, Cormann said.
Abbott’s government in April hired Macquarie Group Ltd, Deutsche Bank AG and Goldman Sachs Group Inc to manage the Medibank IPO.
It has also assigned advisers to scoping studies on other asset sales including Defence Housing Australia, the Royal Australian Mint and the Australian Securities and Investments Commission’s registry business.
“The government has long been committed to the sale of Medibank Private,” Cormann said in a statement. “The government intends to sell down its entire shareholding.”
Cormann said the indicative price range for retail investors had been set at A$1.55 to A$2 per share.
This would give Medibank Private a market capitalization of A$4.26 billion to A$5.51 billion, placing it in the top 100 companies listed on the Australian Securities Exchange, he added.
Cormann said the sale would remove the current conflict where the government is both the regulator of the private health insurance market and owner of the largest market participant. Medibank provides cover to 3.8 million people.
The government has previously said Medibank is one of 34 competing funds in the private health insurance market in Australia and that a scoping study had found no evidence that premiums would rise as a result of the sale.
Australia provides its citizens with free or subsidized health care at clinics and hospitals through Medicare.
It also encourages people through tax benefits to take out private health insurance through companies like Medibank.
About 47 percent of Australians are covered by private insurers for hospital treatment while 55 percent are covered for other services such as dental and optical, according to a statement in June from the government’s Private Health Insurance Administration Council.
Additional reporting by Bloomberg
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