Westpac agrees to terminate Pacific sale

Westpac has announced that it has reached a mutual agreement with Kina Securities Limited (Kina) to terminate its planned sale of Westpac Pacific to the Papua New Guinea (PNG)-based bank.

The decision to terminate comes after PNG’s Independent Consumer and Competition Commission (ICCC) announced last week that it would not authorise the acquisition. 

According to a statement published by Westpac on Wednesday (22 September), the major bank will be “assessing other exit options in line with its focus on banking in Australia and New Zealand” while continuing to operate its PNG and Fiji businesses, as well as supporting its customers.

The bank added that as the deal was expected to have had a loss on sale of $121 million (which included the write-down of “certain assets, transaction costs and provisioning for estimated costs of separation”), Westpac said that some of these items may now need to be written back.

It is expected that it will confirm which items will be written back ahead of its full-year 2021 results announcement, due on 1 November. 

In a separate statement, Kina expressed that it now expects, due to both the cost of the transaction and the loss of expected revenue from the acquisition, that its 2021 full-year results will be in line with that of 2020. 

Speaking on the termination of the deal, Kina’s managing director and chief executive officer Greg Pawson said: “Whilst we are disappointed that the acquisition has not proceeded, this in no way changes the company’s strategy of seeking both organic and inorganic growth in PNG and the Pacific Region, and the outlook for the company remains positive.”

Background to the deal

First announced in December 2020, the intended deal would have seen Kina acquire Westpac Fiji and Westpac’s 89.91 percent stake in Westpac Bank PNG Limited. 

However, the ICCC raised its concerns of the deal in July, issuing a draft determination against authorisation where it cited competition concerns.

According to media reports in both PNG and Australia, the sale would have expanded Kina’s customer base in PNG from an estimated 165,000 to over half a million, while also reducing the number of commercial banks in the country to two. 

In August, Kina submitted its “vigorous strategy” to ensure that the acquisition would benefit customers to ICCC, but the competition regulator remained unswayed. On 14 September, both Westpac and Kina published statements that the ICCC had made a final determination and that it would not be approving the sale.  

[Related: Westpac PNG sale blocked by ICCC]