New Zealand Consortium Wants National Bank Sunday, Aug 10, 2003
Growing anxiety, on varying grounds, about the implications that may arise from the sale of the National Bank to a foreign buyer, may be allayed if a New Zealand bid is given the opportunity to buy the bank.
A New Zealand consortium – which has adopted the name ‘Black Horse Holdings Consortium’ (BHH) – has been formed to bid for the purchase of the National Bank, with a view to a subsequent partial float to the New Zealand investing public.
The initial Promoters for the bid are: Waikato entrepreneur, Phil Verry, who has driven most of the reforms to the New Zealand wool industry over the past decade; and Martin Verry; founder and director of one of New Zealand’s fast growing publishing and marketing companies, iStart Ltd. Both have relevant professional experience.
They say they have networked with a selected group of prominent and influential New Zealanders, who share a preference to have the National Bank purchased by New Zealanders and listed on the New Zealand Stock Exchange, following an issue of shares to the investing public.
Mr Verry says, if the bid is successful, due to its size, a partial float would probably involve most New Zealand finance sector intermediaries.
“Realistically, to supplant rival prospective foreign buyers, there is room for only one New Zealand bid. Our research has confirmed there is enormous latent domestic support and goodwill for a Kiwi bid, even from some local finance brokers whose overseas affiliates are involved with rival bids by foreign banks, which precludes them from participating with BHH at this time. Obviously, such constraints will be removed if BHH becomes the preferred bidder, which we believe it deserves to be, on its relative merits” he says.
Mr Verry says the BHH bid has been carefully designed to attain two principal objectives: to ensure it is the most attractive bid offered to the present owners, Lloyds TSB Group, London; and to ensure that the float to the public is made on terms that are attractive to the investing public.
“The bidding process being used by Lloyds’ Australian selling agents, Deutsche Bank, is a disappointingly sterile marketing approach, which we believe is unlikely to yield the best outcomes for either Lloyds or the National Bank, let alone New Zealand’s economic interests” says Phil Verry.
“On the other hand, the conventional public float approach would be little better and could be fraught with commercial risk for Lloyds” he says.
“To engineer a better outcome, we have originated a carefully designed sound and innovative strategy, which enhances the value of the National Bank and neutralises risk” says Phil Verry.
“We realise this project is a challenge, but we have succeeded with one larger. The National Bank is a key asset in arguably the most strategic sector of the economy. An effort should be made for New Zealanders to own and control such an important asset. If we don’t succeed, we will at least have presented the best New Zealand option” he says.
A successful well-backed BHH bid, on behalf of New Zealand, would automatically remove the concerns of: the Commerce Commission, about excessive concentration of market dominance; and Reserve Bank Governor, Alan Bollard, about foreign risk creation for the New Zealand trading bank sector. Presumably, it would also remove the anxieties of National Bank management and staff, about redundancies and wholesale branch closures, and the apprehensions of those existing National Bank customers who would not welcome the takeover absorption and dislocation of ‘their’ bank, especially by an Australian-controlled rival bank.
The history of bank mergers, including in New Zealand, records many failures to create value for the buyer’s shareholders, due to post-merger progressive erosion of market share. The BHH bid does not need to allow for the inherent discount, for which rival bidders, who are intent on merger, should prudently allow.
Mr Verry says the message from BHH’s research is loud and clear: that New Zealanders would strongly support acquisition which includes the broad-based New Zealand investing public; in preference to a purchase by a foreign organization and the risk of defacto cartelisation of the trading bank sector, to the detriment of the New Zealand community and economy.
“We are confident the BHH proposition, once considered on its relative merits, should be preferred by all interested parties, including: Lloyds TSB Group; the National Bank; its staff and customers; the regulatory authorities; the New Zealand investing public; the New Zealand Stock Exchange; and the general New Zealand economy” says Phil Verry.
“The National Bank is a respected and well-run organisation. It has already attained a high degree of profit optimisation, which leaves little potential for a new owner relying upon conventional approaches. However, the innovative BHH strategy is designed to materially grow the bank’s profitability. Apart from that, we would prefer to keep the bank largely intact, including its board of directors, management, staff and branch network, to continue the excellent service the bank already provides to its customers and owners”, he says.
The sale process is ongoing, which could be a constraint for the new late bid.
“Realistically, there is no time to assemble in advance the backing of brokers and institutional investors. We are certain they will be there, when needed. The key success factors, now, are: the innovative BHH strategy; and a partnering funding bank. We are now approaching potential partnering banks. We believe we have an outstandingly attractive proposition to offer them. Of course, the door is also open for Lloyds, itself, to be the partnering bank” says Phil Verry.
He says the BHH bid is designed to provide Lloyds TSB Group with early cash-out, even if it was the partnering bank, plus optimisation of its realised sale price.
The Promoters report concerns expressed by sources within the New Zealand finance sector that, with the sale process controlled by Australians, a Kiwi bid may be peremptorily shut out, which is likely to favour a bid by an Australian bank. Australians, generally, are nationalistic and are not known for fostering New Zealand’s interests. Memories are still fresh of: the shut-out of Air New Zealand; the Rugby World cup episode; and, more recently, the removal of Auckland as a stop-over port for the Volvo yacht race, in favour of Melbourne.
“We are not allowing ourselves to be distracted by such apprehensions, which may be unfounded, nor do we need to. With the power and innovation of the BHH strategy, we are confident we can produce the best outcome, especially for Lloyds. That should be enough” says Phil Verry.
“There are 130 years of reciprocated loyalty and respect between Lloyds’ and this community, especiall