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Healthy profit: Medibank sale nets $5.7 billion

Questions about the ownership of Medibank Private have not stopped mum and dad investors from grabbing a piece of the health insurer and delivering a windfall to the government.

On Sunday, Finance Minister Mathias Cormann revealed the sale offer had beaten expectations, raising close to $5.7 billion for the government. If demand had been lukewarm, projections suggested the business would earn the government about $4.3 billion.

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Senator Cormann said there was strong interest from Australian households, which would pay $2 per share, while institutional investors would pay $2.15.

He said the split was in line with previous privatisations.

“We felt it was appropriate to allocate 60 per cent to mums and dads across Australia to ensure that they can appropriately share in the future of Medibank,” he told reporters on Sunday.

“It’s obviously a win for Australian taxpayers because they have been able to release the capital that was tied up in Medibank.

“We are in a position now to be able to release that capital in job-creating, productivity-enhancing infrastructure.”

Senator Cormann didn’t comment specifically on some fund manager observations that Australia’s largest private health insurance company wasn’t a big growth prospect, but rather on the issue of cost-cutting, and the push for a leaner operational structure.

Senator Cormann said the result surpassed expectations and the proceeds would be spent on infrastructure projects that would create more jobs through the asset recycling fund.

The fund is designed to help states and territories sell off public assets and spend the revenue on infrastructure.

He also emphasised the benefits privatisation would have for the health insurance provider in the future.

“We have always said we believe that, into the future, Medibank Private in private ownership will be able to perform better than in public ownership,” he said.

“Principally because they will be more flexible in pursuing opportunities into the future, there will be better access to capital markets and they will have opportunities to perform and to do the best they can without having the restrictions of Government ownership imposed on them.”

Nervous mums and dads will watch as Medibank Private make its debut on the Australian stock exchange on Tuesday at 12pm.

with AAP, ABC

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