UPDATE 1-Australia to sell insurer Medibank Private in IPO

Wed Mar 26, 2014 2:20am EDT

* Medibank IPO could fetch A$4 bln, among biggest of the year

* Australian government says sale would help competition

* Government wants to use proceeds to fund infrastructure (Adds Fin Min quotes, detail on Australian IPOs, plans for proceeds)

SYDNEY, March 26 (Reuters) - The Australian government said on Wednesday it will sell state-owned health insurer Medibank Private in a public float, which local media have tipped could fetch about A$4 billion ($3.76 billion), but added the structure of the sale was yet to be decided.

The decision follows a lengthy study which found that taking the company public would improve competition in the health insurance industry, Finance Minister Mathias Cormann said.

Australia's federal and state governments are pursuing an aggressive strategy of selling off state-owned assets to pay down debt and fund investment in roads and other infrastructure projects.

"Our stated intention is to recycle the capital that is thrown up from the sale of Medibank to invest in productivity and infrastructure," Cormann told reporters.

The announcement also comes as private equity companies look to equity markets as an increasingly attractive exit opportunity.

Medibank would rank among the biggest Australian floats of the year, alongside another health-related company, hospital operator Healthscope, which owners TPG Capital and The Carlyle Group are contemplating floating for an estimated A$5 billion.

The government plans to sell Medibank in the 2014/15 financial year but "the precise time is yet to be decided", Cormann said, adding the sale will still ultimately depend on market conditions. The structure of the sale also was yet to be decided, he said.

"We would expect that there would be wide ranging interest in the opportunity to invest in Medibank Private as a business... including (from) retail and institutional investors," he said.

Some doctor groups have warned that taking Medibank public could drive up insurance premiums but the scoping study found it would have the opposite effect, Cormann said.

"The advice that we've got... is this will strengthen competition in the health insurance market," he said, adding existing legislation puts an ownership limit of 15 percent for any individual organisation for a period of five years.

"We will continue to take financial advice and continue to monitor market conditions closely," he said. "Our objective is to maximise proceeds from the sale."

($1 = 1.0933 Australian Dollars) (Reporting by Byron Kaye; Editing by Anupama Dwivedi)

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article