Nabilah S
Westpac’s plan to exit the Pacific has hit a major snag, as Papua New Guinea’s competition regulator has rejected the $420 million (US$176 million) sale of its operations to Kina Securities in a final determination.
This decision means that Westpac can no longer sell its PNG bank to Kina, as the sale required approval from the Independent Consumer and Competition Commission in PNG.
The sale to Kina was initially announced last December, aligning with Westpac’s strategy to streamline its operations and concentrate on banking in Australia and New Zealand. Kina was the only feasible buyer for Westpac’s network in PNG and Fiji.
The proposed deal aimed to merge PNG’s second and third largest banks, boosting Kina’s customer base from 165,000 to over half a million. This merger would have left only two commercial banks on the island: Kina and the larger Bank South Pacific.
In July, both Westpac and Kina contested a preliminary ICCC decision that the sale to ASX-listed Kina Securities would significantly reduce competition.
On Tuesday morning, Westpac announced to the ASX that the ICCC had issued its final decision, denying authorization for the sale.
“Westpac acknowledges the ICCC’s determination and will continue to operate these businesses while it reviews the impact on the sale to Kina Bank,” the statement read.
Bank South Pacific, PNG’s largest lender and also ASX-listed, opposed the deal. Its CEO, Robin Fleming, argued that the merger “won’t necessarily stimulate innovation and product and service availability” and expressed concern that “having further concentration of two banks with less geographic spread and availability of services” would not be beneficial.
At an ICCC hearing in August, Westpac CEO Peter King stated that no other buyers for the assets had been found during the sale process. “Without the option to sell to Kina, our only remaining course would be to progressively scale down the business and look for an exit whenever possible,” he said.
Following the draft determination, Kina Securities CEO Greg Pawson made a final attempt to secure the deal, committing to invest nearly $10 million (US$7.3 million) in digital technology and to expand Westpac’s branch network by 50 percent within the first three years post-acquisition. He also assured regulators that the senior management and executive roles at Westpac PNG would be nationalized and given to local PNG talent, including the country head position.
However, these efforts were insufficient to sway PNG’s regulators, who continued to oppose the transaction.
In 2019, Kina acquired ANZ’s retail, commercial, and small business lending operations in PNG.
