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Senate authorises proposed sale of Medibank Private Limited.



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Senator the Hon Nick Minchin

Minister for Finance and Administration Leader of the Government in the Senate

Media Release

72/2006 5 December 2006

Senate authorises proposed sale of Medibank Private Limited

Medibank Private Limited will be floated in 2008 if the Government is re-elected, now that the Senate has passed legislation enabling the sale, the Minister for Finance and Administration, Senator Nick Minchin, said today.

"This sale will increase competition in the private health insurance industry, improve services to contributors and give all Australians the opportunity to own part of the company through a public float," Senator Minchin said.

"The Government will also recognise existing members through an entitlement as part of the public offer structure, with the nature of that entitlement to be finalised closer to the float," he said.

"If the Government is re-elected next year, it will move immediately to start the Medibank Private sale process so the sale can be concluded as soon as possible in 2008.

"Passing the legislation now enables the Government and the very capable management team at Medibank Private to move the company to a fully commercial footing, undertake a detailed vendor due diligence process, settle the offer structure including entitlements to be offered to existing Medibank Private contributors, and finalise sale process arrangements with Medibank Private and its Board.

"There are exciting times ahead for Medibank Private, its customers and the broader private health insurance industry. Once Medibank Private is listed on the stock exchange, it can raise capital, expand and offer more services to its customers - avenues to growth currently choked by its Government ownership.

"The private health insurance industry will also benefit from the largest health fund being privately owned and competing on a level playing field. This great Australian company will be able to provide even better services once it is free from government ownership and can compete on a level playing field.”

The Medibank Private Limited Sale Act:

z Repeals section 35 of the Health Insurance Commission (Reform and Separation of Functions)

Act 1997 to enable the Government to sell its shares in Medibank Private;

z Enables an appropriate commercial structure to be put in place for the sale process;

z Prevents any takeover, foreign or otherwise, of Medibank Private for a period of five years after

the sale with no single shareholder, whether foreign or domestic, able to own more than 15% of the company (this shareholder cap will remain in place for 5 years, after which foreign interests must also comply with the FIRB process set out in the Foreign Acquisitions and Takeovers Act 1975, so the Treasurer could block any foreign sale that is not in the national interest), and

z Puts in place provisions for five years to ensure Medibank Private remains an Australian

company, including a requirement that it remains incorporated in Australia and that a majority of its directors and its head office be Australian for the first five years post-sale.

"The float will not proceed until 2008 based on strong advice from our Telstra sale advisers that it was not in taxpayers’ interests to have two competing share market floats, and that holding the Medibank Private sale in the near future could have affected demand for Telstra shares,” Senator Minchin said.

"Following the outstanding success of the T3 sale, and a suitable hiatus period, the Government and its advisers will be able to focus firmly on ensuring similar success for the Medibank sale.”

Senator Minchin emphasised that premiums will not increase as a result of the sale, with independent economic analysis highlighting the potential efficiency benefits that may result from a privatised Medibank Private, which will assist in restricting growth in premiums into the future.

"Medibank Private will continue to be subject to the Government’s ministerial premium approval process and I am confident that market pressures will act as a strong force to keep a lid on premiums.

"Labor’s sale of Qantas didn’t push air fares up, and Labor’s sale of the Commonwealth Bank didn’t push interest rates up so it is nonsensical and hypocritical for Labor to claim that the sale of Medibank Private will increase health premiums.

"It is also important to note that Medibank Private is not a mutual organisation and is not owned by the contributors to the fund - a position confirmed by clear legal advice which I have previously tabled in Parliament.

"The Government thanks the current board, CEO and management of Medibank Private for their excellent work in turning around the company’s finances and putting it in a position where it is ready for sale,” Senator Minchin said.

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This page was last updated 5 December, 2006

Media Contact: Senator Minchin's Office - Simon Troeth (02) 6277 7400/ (0439) 300 335

Website:

www.financeminister.gov.au