1 December 2020
HESTA announced as cornerstone investor in Australia-first innovative listed impact investment with Australian Unity
HESTA has committed $20 million as a cornerstone investor in Australian Unity’s inaugural issuance of Mutual Capital Instruments (MCIs), helping to establish a new capital source for the For Purpose, Mutual sector in Australia.
The $100 million issuance of the ASX-quoted MCIs has the potential to expand Australia’s impact investment market, allowing retail investors to invest for social impact alongside large institutional investors.
The $56 billion industry fund has made the investment through its $90 million Social Impact Investment Trust (SIIT), managed by specialist impact manager Social Ventures Australia (SVA). The SIIT aims to catalyse the development of Australia’s impact investment market through developing a pipeline of investments designed to earn an appropriate market return and a measurable social impact.
MCIs represent a potential new source of capital for the $104.4 billion co-operative and mutual enterprise (CME) sector, which was previously reliant on retained profits to expand their operations. Legislative change in 2019 enabled the creation of MCIs, providing the opportunity for mutual entities like Australian Unity to access permanent capital without compromising their mutual status.
“We’re very excited to be the first investors to support Australian Unity to bring MCIs to market as we both share a long-term interest in building this country’s social infrastructure,” HESTA CEO Debby Blakey said.
“As patient, long-term investors we see an exciting opportunity to invest in the fast-growing ‘care’ economy that can generate strong returns for HESTA members while helping to create growth and jobs in the industries where they work. Investing in the health and community services sector will also support a faster, higher-quality COVID recovery and the long-term resilience of our economy.”
As a large mutual with a 180-year history, Australian Unity has built a diversified, but thematically-linked portfolio of health, wealth and care products and services that meet the wellbeing needs of its members and customers, while delivering community and social value.
“Capital raised through the offer will be used for a range of opportunities, including pursuing near-term growth opportunities within the individual businesses as well as investing capital where third party funding has historically been used,” Australian Unity Group Managing Director Rohan Mead said.
“The use of proceeds may also extend to merger and acquisition opportunities across our business platforms – to increase investment in social infrastructure and to help support business consolidations in important mutual sectors such as private health insurance, banking and friendly societies.”
Mr Mead welcomed HESTA’s investment as reflecting a shared commitment to helping address Australia’s social infrastructure challenges in areas such as health and aged care.
“We also note that as a superannuation fund, HESTA covers about 22 percent of our 7000 employees and supports our commitment to a predominantly permanent workforce in this key area of community need,” he said.
Rebecca Thomas, Executive Director, Impact Investing at SVA said the issuance of Australia’s first MCI was a unique opportunity for retail and institutional investors to directly invest in an impact driven organisation of the scale of Australian Unity.
“We’ve seen extraordinary growth in Australia’s social impact investment market over the past few years. Much of this growth has come from unlisted assets classes. The sources of investment for these opportunities have come mainly from family offices, high net worth individuals and institutional investors, but this raising by Australian Unity can also be accessed by retail investors.”
“Bringing this MCI to market with an organisation with the expertise and deep community links of Australian Unity provides the potential for the development of an entirely new social impact investment product that’s available to both small and large investors alike.”
“The success of this raising could see a pipeline of similar issuances, with the potential to drive the growth of larger scale social impact-focused organisations within the mutual market.”
 Gross annual turnover. Source: Centre for Entrepreneurial Management and Innovation, Australia’s Leading Co-operative and Mutual Enterprises in 2019.
About Australian Unity
Established in 1840, Australian Unity is a member-owned wellbeing company with 260,000 members and more than 700,000 customers.
Australian Unity’s range of health, wealth and care products and services provides member, customer and community value that is supportive of personal and community wellbeing.
Social Ventures Australia (SVA) is a not-for-profit organisation that works with partners to alleviate disadvantage – towards an Australia where all people and communities thrive. We influence systems to deliver better social outcomes for people by learning about what works in communities, helping organisations be more effective, sharing our perspectives and advocating for change.
What are MCIs?
MCIs are financial instruments created exclusively for mutual entities. They enable certain mutual entities, including Australian Unity, to access permanent capital without compromising their status as a mutual entity and to decrease their reliance on retained profits as a source of new capital. The opportunity to issue mutual capital instruments was created by a legislative change in 2019. Australian Unity’s proposed issue of MCIs is the first issue of MCIs in Australia.
What are the features of MCIs?
MCIs are perpetual and fully paid shares issued by Australian Unity, offering investors non-cumulative and discretionary fixed-rate dividends. Dividends are expected to be distributed semi-annually in arrears and are expected to be fully franked. The dividend rate will be determined through a bookbuild process. MCIs are intended to be quoted on the ASX.
How are MCIs different from other securities?
There are important differences between MCIs and other securities. For example, while MCIs are shares, they do not convey any rights to participate in the profits or growth of Australian Unity, other than receipt of non-cumulative and discretionary dividends at the fixed dividend rate. Also, MCIs rank behind all creditors of Australian Unity in the event of a winding-up, but ahead of the rights of non-shareholder members to the value of any declared but unpaid dividends and repayment of the face value of the MCIs.
Do MCI holders have voting rights?
Reflecting Australian Unity’s status as a mutual entity, its constitution enshrines a limit of one vote per member for any member. This approach will also apply to MCI holders, who will only have one vote at a general meeting of Australian Unity, regardless of the number of Australian Unity MCIs they hold and whether or not they are an Australian Unity member. In addition, MCI holders will not be able to vote on a demutualisation.
An initial public offering of mutual capital instruments (“MCIs”) for issue is being made by Australian Unity Limited, pursuant to a prospectus dated 27 November 2020. The prospectus is available and may be obtained at www.australianunity.com.au/mci or by calling the Australian Unity MCI Offer Information Line on 1300 494 861 (Monday to Friday 8:30am to 5:30pm). If you wish to apply for MCIs, you must complete an application form that is in or which accompanies the prospectus. You should consider the prospectus carefully before deciding whether to invest.
NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
This announcement has been prepared for publication in Australia and may not be distributed or released in the United States. This announcement does not constitute an offer, invitation or recommendation to subscribe for or purchase any security or financial product and neither this announcement nor anything attached to this announcement shall form the basis of any contract or commitment. In particular, this announcement does not constitute an offer to sell, or a solicitation of an offer to buy, securities in the United States. The MCIs have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the U.S. Securities Act) or the securities laws of any state or other jurisdiction of the United States. Accordingly, the MCIs may not be offered or sold, directly or indirectly, to persons in the United States unless they have been registered under the U.S. Securities Act (which Australian Unity has no intention or obligation to do or procure) or are offered and sold pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act and any other applicable U.S. state securities laws.