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Earlier the company had been looking at an IPO on the New Zealand sharemarket but decided to pursue the private equity path for new capital because market conditions last year became volatile and unfavourable.
“The market in New Zealand was a really bad for listing,” Partners Life managing director Naomi Ballantyne says. “We decided this is just the wrong time to list.”
Under the deal, which was inked on the weekend, US-based Blackstone will put $200 million of new capital into the company over the next two years. This will give it a 45% stake in the business.
The New York-headquartered Blackstone is listed on the New York Stock Exchange and is one of the world’s largest asset managers with more than $500 billion (US$344 billion) in assets under management.
Blackstone recently bought five New Zealand retirement villages.
Ballantyne says it is new shares, rather than existing shareholders selling down their stake.
She said with Blackstone coming on board she would be more likely to put more money into the company rather then selling down.
“I would be wanting to put more money in not take it out,” she said.
While Blackstone gets 45% of the company for $200 million it values the company well north of the the $440 million mark as Blackstone is buying a large minority stake at a discounted price.
Ballantyne says when Partners went down the private equity route it ended up with two companies interested in the business, although Blackstone was the only one to issue a term sheet.
She says Blackstone liked what Partners Life was building in New Zealand and that it was “disrupting an industry that was as old as time.”
Ballantyne says Partners Life will continue to use reinsurance finance but it has been reducing its reliance on this source of capital for some time.
Partners has been stepping down its reinsurance in each treaty cycle but it was not going to walk away from it, she said.
She says reinsurance is “very efficient” capital and there is a place for it in a life company.
While the company has been criticised for its use of reinsurance, Ballantyne says it has been fully compliant with the Reserve Bank’s rules.
Ballantyne expects that Partners Life will see its rating lift. Besides getting $200 million of capital it has also just completed its fifth year in business - a milestone ratings agencies like.
She says the deal should put an end to comments from the company’s competitors that it was going to run out of money.
While Partners Life has done this private equity deal the prospect of a listing at some stage is still on the cards.
“We intend to go for a public listing when market conditions are right, and the support of Blackstone up to and throughout a future listing process will allow the company to solidify its market leading position in New Zealand.”
Ballantyne says having Blackstone as a shareholder gives it more listing options.
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