Australia raised A$5.68 billion (US$4.9 billion) selling shares of Medibank Private Ltd in the country’s second-largest initial public offering.
The government sold about 2.7 billion shares in the country’s biggest health insurer at a price of A$2.15 apiece for institutional investors, Australian Finance Minister Mathias Cormann said in a conference call yesterday.
All the Medibank shares offered were sold, he said in a separate statement.
“The offer has generated a very high level of demand both from domestic and offshore institutional investors,” Cormann said from Perth.
Medibank “will be more flexible in pursuing growth opportunities into the future, they will have better access to capital markets and they will have the opportunity to perform and do the best they can without having the restrictions of government ownership imposed on them,” he said.
Australian Prime Minister Tony Abbott is cutting spending and selling assets as he seeks to rein in a budget deficit that swelled to A$48.5 billion in the year through June.
Australia’s benchmark stock index has slipped 5.7 percent since Aug. 29, when some details of the IPO were announced, amid increasing signs that economies from Japan to Europe are losing momentum.
The government had raised the indicative IPO price range to A$2 to A$2.30 a share, citing strong demand from institutional investors. The shares were previously marketed at A$1.55 to A$2 apiece. The price for individual investors was capped at A$2.
The new price range valued Medibank at 21.3 times to 24.5 times estimated earnings for the year ending June next year, according to data compiled by Bloomberg. NIB Holdings Ltd, the nation’s only other listed health insurer, trades at 19.8 times profit on that basis.
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 Medibank offering surpassed the A$4.3 billion raised when the state government of Queensland sold a stake in rail operator Aurizon Holdings Ltd in 2010, according to data compiled by Bloomberg. It is Australia’s biggest IPO since Telstra Corp’s sale in 1997.
Medibank Private is to list on the ASX at 12pm Sydney time tomorrow with the code MPL, according to the minister’s statement. The benchmark index has retreated 0.9 percent this year as the Australian dollar lost 2.8 percent.
Medibank, led by CEO George Savvides, forecasts a fully franked dividend of 4.9 cents per share for the seven months through June next year, according to the listing prospectus. Retail investors were allocated 60 percent of the shares on issue, according to Cormann.
Australia provides its citizens with free or subsidized healthcare 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 June statement from the government’s Private Health Insurance Administration Council.
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