Medibank Private could emerge as a takeover target, particularly for an overseas insurer, once listed on the sharemarket, says rival health insurer NIB.
"I'd be surprised if it's not the subject of overseas interest once it's listed," NIB chief executive Mark Fitzgibbon told BusinessDay, as the the government announced a scoping study into the long-mooted sale.
Asked whether NIB would be interested, Mr Fitzgibbon said it was not part of the insurer's strategic plan but "never say never".
NIB is Australia's only listed private health insurer, with more than 470,000 policyholders, and has gained profile among investment banks in expectation of the Medibank sale. NIB has 18 branches, Medibank has more than 120.
Medibank Private is one of two big players in the private health insurance market, alongside Bupa.
It recently reported a jump in annual profit to $232.7 million, on $5.34 billion revenue.
The three-month scoping study, which will report to the government before the 2014 budget, will provide recommendations on sale method, timing, regulatory issues, readiness for sale and estimated proceeds.
The selloff has been considered controversial given Medibank's capital base has almost entirely been built on taxpayer contributions.
Mr Fitzgibbon said an initial public offering was likely rather than a trade sale, because previous demutualisations of insurers - including NIB - had given members the cash. "When they sell it, members will say, 'How come we're not getting the money?' They will be a bit p---ed off about that."
It is suggested Medibank's 3.8 million members will receive some form of preferential eligibility or discount in a float.
As reported in Fairfax Media, the sale is not expected until late 2014, if not 2015. Amid rumblings that Medibank is not in peak condition for a sale, Mr Fitzgibbon noted that investors made decisions on what a business would do rather than what it had done.
Finance Minister Mathias Cormann said the sale proceeds would "allow the government to fund other policy priorities or pay off debt" and he emphasised the government had not made any decisions about the timing and structure.
Medibank Private chairman Elizabeth Alexander said the insurer "look[ed] forward to working with the government on the future of the company".
The former Labor government extracted hundreds of millions in dividends from Medibank after it converted to "for-profit" status, including a $300 million "special" dividend paid in August.