A proposed 89.91 per cent sale of Westpac Bank PNG Limited to Kina Securities Limited (Kina), worth a reported $420 million, is unlikely to go ahead after Papua New Guinea’s (PNG) Independent Consumer and Competition Commission (ICCC) said it would not provide authorisation for the deal to proceed.
The PNG competition regulator said it was not satisfied the acquisition would benefit the PNG public, nor that it would not have, or would not be likely to have, the “effect of substantially lessening competition in the PNG markets” (i.e. that the deal would likely lessen competition).
Background to the deal
First announced in December 2020, the proposed deal would have seen Westpac Fiji and the major bank’s 89.91 per cent stake in Westpac Bank PNG Ltd transfer to Kina. However, in July, the ICCC issued a draft determination against authorisation, citing competition concerns.
According to PNG media reports, the ICCC was concerned that the sale would have expanded Kina’s customer base (estimated to be from 165,000 to over half a million) while reducing the number of commercial banks in PNG to two (in 2019, Kina also purchased ANZ’s retail, commercial and SME banking business in PNG).
The regulator concluded that the proposed acquisition would therefore not be likely to result in public benefits that outweigh detriments to the public, including those resulting from the lessening of competition and choice.
However, in August, Kina put forward its strategy as to why the deal would provide “more competition in the banking sector, more innovation and more customer choice for Papua New Guinea” – the bank stating that they would invest PGK25 million ($9.7 million) in technology and digital innovation, as well as establishing a new pan-Pacific bank based in PNG.
This new bank was also intended to be rebranded as East West Commercial Bank with Kina managing director and chief executive Greg Pawson stating at the time this new bank would have directly competed with Kina Bank, providing customers with a full range of competitive, innovative financial services.
Kina chairman Isikeli Taureka also said at the time that Kina’s mission is to “constantly improve the prosperity of the people, communities and markets that we serve”.
“We strongly believe that this transaction should be approved by the ICCC,” he added.
Westpac to operate business separately
Following the ICCC’s final determination, Westpac issued the following statement: “Westpac acknowledges the ICCC’s determination and will continue to operate these businesses while it reviews the impact on the sale to Kina Bank.”
Kina similarly announced it has begun assessing the implications of the ICCC decision and is considering its options.