Medibank IPO raises A$5.68b

Melbourne

AUSTRALIA raised A$5.68 billion (S$6.4 billion) selling shares of Medibank Private Ltd in the country's second-largest initial public offering (IPO).

The government sold about 2.7 billion shares in the nation's biggest health insurer at A$2.15 apiece for institutional investors and A$2 for individuals, Finance Minister Mathias Cormann said on a conference call on Sunday. The sale brought the total amount raised by Australian IPOs this year to A$15.9 billion, the highest since at least 1997, data compiled by Bloomberg show.

"It has been a very strong year for Australia IPOs, despite what has happened with market volatility in the last three to four months," Evan Lucas, a markets strategist in Melbourne at IG Ltd, said. "The support from equity markets in 2013 and 2014 is a huge contrast to the previous two years when things were very slow."

Prime Minister Tony Abbott is cutting spending and selling assets as he seeks to rein in a budget deficit that swelled to A$48.5 billion in the year through June. Australia's benchmark stock index has slipped 4.8 per cent since Aug 29, when some details of the IPO were announced, amid increasing signs that economies from Japan to Europe are losing momentum.

The government had raised the indicative IPO price range to A$2 to A$2.30 a share, citing strong demand from institutional investors. The shares were previously marketed at A$1.55 to A$2 apiece. The price for individual investors was capped at A$2.

"The government has looked after the mums and dads in granting retail investors a premium when the stock starts trading tomorrow," IG's Mr Lucas said. "Because of the scalebacks, institutions will be underweight and there is likely to be solid buying tomorrow as they top up their holdings."

The sale price values Medibank at 22.9 times estimated earnings for the year ending June 2015, according to data compiled by Bloomberg. NIB Holdings Ltd, the nation's only other listed health insurer, trades at 19.3 times profit on that basis.

"The offer has generated a very high level of demand both from domestic and offshore institutional investors," Mr Cormann said on Sunday.

Medibank "will be more flexible in pursuing growth opportunities into the future, they will have better access to capital markets and they will have the opportunity to perform and do the best they can without having the restrictions of government ownership imposed on them."

The Medibank offering surpassed the A$4.3 billion raised when the government of Queensland state sold a stake in rail operator Aurizon Holdings Ltd in 2010, according to data compiled by Bloomberg. It is Australia's biggest IPO since Telstra Corp's sale in 1997. BLOOMBERG