It said it did so to make sure Kiwibank remains fully New Zealand owned.
The move thwarts any attempt by the NZ Super Fund to acquire all of the bank and then restructure it.
The Super Fund owned part of KGH along with NZ Post and ACC.
These owners took over when the previous National Government was unwilling to provide capital directly to Kiwibank. But at the time of that deal, the Government retained a right of first refusal over any subsequent sale.
The KGH purchase is valued at $2.1 billion. The Minister of Finance Grant Robertson said the money would come from previously announced borrowing.
But the fiscal impact is expected to be diminished by horizontal transfers from one Crown account to another.
In buying KGH, Robertson made clear his aim was to prevent the bank from disappearing into overseas ownership.
He then explained the rationale for the deal further.
“While the Crown essentially owned KGH through Crown-owned entities, an ongoing shareholding in Kiwibank did not fit NZ Post’s and ACC’s long term strategic and investment plans,” he said.
“NZ Super Fund had been interested in purchasing a majority holding in KGH, but withdrew its interest as it did not align with the Government’s commitment to public and New Zealand ownership.”
The Super Fund was widely believed to be frustrated at having its hands tied in regard to its KGH holdings, since it could profit solely from Kiwibank dividends, not from asset sales.
KGH earlier sold its KiwSaver and insurance arms. It retains its mortgage company, New Zealand Home Loans.
Robertson was chipper about Kiwibank's prospects, saying it was “set up strongly for future growth.
“The new ownership structure simplifies our ability to fully support Kiwibank to meet its future potential. The transaction is subject to regulatory approval by the Reserve Bank.
“With Kiwibank staying in New Zealand hands, New Zealanders can continue to bank with a trusted, credible and competitive banking option that will remain fully locally owned.”
Kiwibank recently posted a record profit, but it was still less than one tenth of the ASB profit posted just a few days earlier.
Kiwibank management welcomed the Government announcement.
So did the Super Fund, which will get $527 million for its share of KGH.
Its chief executive Matt Whineray called the offer “fair and attractive.”
