Heartland Bank says it’s planning a corporate restructure that will remove business growth constraints stemming from Reserve Bank regulation, that will include it listing on the Australian sharemarket.
In an announcement to the New Zealand sharemarket on Wednesday morning Heartland said the restructure will result in Heartland Bank Limited becoming a wholly owned subsidiary of a new listed parent company, called Heartland Group Holdings Limited. Existing shareholders’ shares in Heartland Bank will be exchanged with new shares in the New Listed Parent on a one-for-one basis, and the Australian group companies will be transferred from Heartland Bank to the New Listed Parent so that they become sister companies of Heartland Bank, rather than subsidiaries.
The restructure will be done via a scheme of arrangement that requires shareholder and High Court approval. Heartland is asking shareholders to consider and vote on the restructure at its Annual Shareholder Meeting in Auckland on September 19.
Heartland also says the restructure requires formal non-objection from the Reserve Bank, which it has received. Ironically the bank also says the restructure will remove business growth constraints arising from Reserve Bank regulations. Additionally it says the restructure will provide greater flexibility for Heartland to “explore and take advantage of future growth opportunities in New Zealand and Australia outside the banking group regulated by the Reserve Bank.”
“In addition, the restructure will facilitate a Foreign Exempt Listing on the ASX, which will expand the capital sources available to the Group in order to fund growth. Heartland has been considering a Foreign Exempt Listing on the ASX for some time, as it believes this will provide access to additional sources of capital for future growth opportunities. The restructure facilitates an ASX listing by the New Listed Parent, so Heartland intends for this to occur at the same time as the restructure takes effect. The New Listed Parent will have its primary listing on the NZX Main Board, with a foreign exempt listing on the ASX,” Heartland says.
“Heartland will shortly file an application with the High Court of New Zealand seeking initial orders that, if granted, will allow the restructure to be voted on by shareholders at the Annual Shareholder Meeting.”
Growing in reverse mortgages and peer-to-peer lending
Heartland was formed through the merger of Marac Finance, CBS Canterbury and the Southern Cross Building Society in January 2011. It gained banking registration from the Reserve Bank in December 2012. Heartland targets niche markets such as reverse mortgages, vehicle lending and livestock finance where bigger banks are not aggressively competing. It also lends money for unsecured personal loans through licensed peer-to-peer lender Harmoney. As of March 31, Heartland had total assets of $4.4 billion.
Heartland has been experiencing strong growth in the reverse mortgage market. It entered the reverse mortgage market on both sides of the Tasman in 2014 after buying Sentinel in New Zealand and the Australian Seniors Finance business for NZ$87 million from the Quadrant Private Equity controlled Seniors Money International. Heartland now has more than NZ$1 billion worth of reverse mortgages, with $430 million in NZ and $598 million in Australia.
As reported by interest.co.nz earlier this year, Heartland is the biggest originator of new reverse mortgages in Australia. However, it operates in the Australian reverse mortgage market free of regulatory oversight from the Australian Prudential Regulation Authority. The NZ bank’s Australian reverse mortgage business is run by Heartland Seniors Finance, a finance company that’s licensed by the Australian Securities and Investments Commission.
Heartland has a 13.35% stake in Harmoney, through which it had lent $119.6 million by December 31 including about A$10 million through Harmoney in Australia.
Scheme booklet & independent report coming
Heartland says it has hired investment bank Cameron Partners to prepare a report on the restructure.
“The purpose of the report is to provide an independent assessment of the merits of the restructure for Heartland’s shareholders. Cameron Partners’ appointment has been approved by the Takeovers Panel and its report will be included in the Scheme Booklet. Further information about the proposed restructure will be provided to shareholders in a scheme booklet which is expected to be released, along with the Notice of Meeting for the Annual Shareholder Meeting, in mid-August 2018,” says Heartland.
“In preparation for the restructure, the board of Heartland Bank has resolved to cancel 440,677 shares held as treasury stock. This reduces Heartland’s total number of shares on issue to 560,147,250.”
Heartland shares were up 1 cent at $1.72 on Wednesday morning.
Below is a diagram provided by Heartland showing the proposed new structure.