SYDNEY (Reuters) - Australian state-owned health insurer Medibank Private Ltd IPO-MDB.AX said it is planning an IPO worth up to $4.8 billion - a listing that is set to be Asia Pacific's biggest this year and to draw strong interest from domestic and international investors.
While Australia's share benchmark index has slid some 6 percent from a record closing high marked in September, the listing of the nation's largest health insurer is still expected to cap a big year for Australian IPOs.
Like other major healthcare companies that have come to market this year, Medibank's long-term earnings prospects look rosy as an aging population creates more demand for health-related services and as the government is expected to continue its support for the heavily subsidized sector.
Finance minister Mathias Cormann said on Monday the government reserves the right to either pull or cut back the sale if market conditions get worse, but bankers responsible for the listing did not expect that to eventuate.
"Obviously volatility last week was pretty pronounced, but at the same time we've had a very very strong response to the marketing campaign so far," James McMurdo, chief executive officer of Australia and New Zealand for Deutsche Bank, a joint lead manager for the sale, told reporters.
"The institutional response both locally and offshore has been exceptionally strong."
The book building range for retail investors was set at between A$1.55 and A$2.00 per share. Offshore investors could pay more if demand ends up extremely strong.
Even at the bottom of the range, the IPO for 100 percent of Medibank Private would still raise A$4.3 billion ($3.7 billion), outstripping the $3.1 billion raised in an offering for HK Electric Investments Ltd (2638.HK) -so far the biggest for Asia-Pacific excluding Japan this year.
Medibank, set up by the government in 1976 as a cheap health insurance option, commands some 30 percent of the market, while rival BUPA Australia Pty Ltd has 27 percent and HCF Group has 11 percent.
More than half the value of Australia's 2014 listings has been health companies. Melbourne-based private hospital company Healthscope Ltd (HSO.AX) has risen some 15 percent over its issue price since listing in July.
Potentially Australia's biggest privatization since telecoms firm Telstra (TLS.AX) in 1997 if it raises more than A$4.6 billion, it is one of the crown jewels in a raft of assets being sold off by the government. The state wants to raise some A$130 billion to fix what it says is a budget crisis caused by overspending.
"It's a big, well publicized float and if it's priced appropriately ... we'll certainly be looking at it," said Jason Beddow, chief executive officer at Argo Investments, when asked about the Medibank listing.
"There have been some reasonable businesses come out of ex-government hands, with some cost saving and productivity improvements."
Several infrastructure-related assets have already come to market and states have also outlined plans to sell ports, power stations and electricity networks in the coming months.
Medibank's book building range is equivalent to between 16.5 times and 21.3 times the forecast A$258.2 million net profit for 2015. By comparison, its only other listed rival NIB Holdings Ltd (NHF.AX) has a 12-month forward price-to-earnings ratio of 16.8 times.
Medibank said it expects operating profit to grow 10.5 percent in the year to June 30 to A$282.1 million, with revenue growth expected to rise 6.2 percent.
It forecast a fully franked dividend of A$0.049 per share - a yield of 4.2 percent to 5.4 percent.
There was no allocation limits set for domestic retail or institutional investors or for overseas investors.
Reporting by Byron Kaye; Additional reporting by Sonali Paul in Melbourne; Editing by