Papua New Guinea’s competition watchdog has knocked back the $420 million sales of Westpac’s Fiji and PNG businesses to Kina, the PNG financial services group.
The proposed sale of its Pacific businesses is part of Westpac's strategy to simplify its operations and focus on banking in Australia and New Zealand.
However, the sale of Westpac Fiji and Westpac’s 89.91 percent stake in Westpac Bank PNG to Kina Securities was subject to regulatory approvals in both Fiji and Papua New Guinea.
On Tuesday, PNG’s Independent Consumer and Competition Commission moved to block Kina Bank from buying Westpac's stake in Westpac Bank PNG.
In July, the island nation’s Independent Consumer and Competition Commission released a draft determination indicating it proposed to deny authorisation to Kina Bank for the proposed purchase.
The ICCC has now released its final determination confirming it has denied authorisation.
“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 lender said.
Deal to reduce competition
Back in July, the regulator's draft determination said the deal would increase barriers to entry in PNG’s retail banking market, lead to increased ‘market power’ for the two remaining retail banks - Kino and BSP Financial Group - and lead to a "likely absence of true competitive pressure".
While the ICCC conceded that the acquisition would allow Kina Bank ‘to gain scale, scope, and network economies necessary to compete more effectively with the dominant firm BSP, it warned that "the incentive to coat-tail and the ability to do so in a highly concentrated market would be very strong and likely to override the incentive to compete."