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Medibank price range revised

21 November 2014 - 9:58am

The privatisation of Australia's largest health insurance provider continued to take another interesting turn this week, as the price cap was lifted for the institutional offering of Medibank Private.

As the book-build for the flotation on the Australian Securities Exchange (ASX) gets underway, institutional investors have been encouraged to bid higher to secure shares.

The indicative price range outlined by the Medibank prospectus was $1.55 - $2 dollars per share, which would earn the government somewhere between $4.3 billion and $5.5 billion.

However, as the retail offering came to a close last week and the share auction for institutions began, the indicative price range was revised to $2.00 - $2.30 per share, the Australian Financial Review reported on Wednesday 19 November.

Price change

As institutional investors rushed to bid for shares on the first day of the Medibank Private share auction, the concern of being outbid and missing out meant some fund managers tabled offers of $2.25 per share - around 12 per cent more than the original price can during the initial public offering (IPO). A day later, this rose another 5c to reach 15 per cent of the capped price per share.

This latest price hike for institutional bidders will be good news for anyone who bid for shares in the retail offering, where the price is limited at $2. This includes preregistered Medibank policyholders, who received up to 30 per cent extra share allocation during the IPO.

The Financial Review also revealed this week that the federal government confirmed high retail demand caused the flotation price to balloon past the $4.8 billion mark. The high interest in purchasing Medibank shares has been evident throughout, as brokers bid for almost eight times their specified allocation at the start of the month.

Comparing health insurance

Medibank policyholders, meanwhile, will be weighing up their options. The flotation on the securities market and the handing over of the insurance provider from the public to private sector has been designed to create a more competitive health insurance market, the state says.

Customers will be looking to see if changing their insurance provider at this time - either from or to Medibank - can result in the price of their cover falling. In such a delicate and competitive market it is quite possible, for which, health insurance brokers will be on hand to help consumers compare health insurance.

The final share price will be officially announced at the health insurer's debut next Tuesday. Investors, meanwhile, will await pricing.