Heartland yet to consider finance arm

Heartland New Zealand has confirmed it could be interested in buying the finance division of Fisher and Paykel Appliances, the takeover target of giant Chinese appliance manufacturer Haier.

The marketplace was speculating for several days that Heartland could be considering a purchase, but that appears to have been jumping the gun.

Haier already has a 20% cornerstone stake in Appliances, plus a further 17.46% held under a lock-up agreement with another shareholder. The total $1.20 per share offer values Appliances at $869 million.

Haier has set a minimum target of eventually holding "more than" 50% of Appliances.

Craigs Investment Partners broker Paul Valk believed if the Haier takeover was successful, the Chinese manufacturer would sell the finance division.

"Haier are unlikely to be wanting to own a small finance company in New Zealand. They could flick it," Mr Valk said.

Heartland head of treasury and strategy Mark Steven, when contacted, said Heartland was always open to considering assets for acquisition, but if that asset was Appliances' finance arm, Heartland "would have to have a bigger think about it".

"It is an asset Heartland would be interested in having a look at, but I'm circumspect on whether it [the finance arm] will be for sale," he said.

Mr Valk said while trading in Appliances' shares had seen a lot of speculative activity since the takeover bid, investors were not yet factoring in any potential sale of the finance arm.

However, a recent Wall Street Journal article has been doing the rounds of investors, specifically raising the question of the finance division's future and the possibility Heartland could be a buyer.

"Amid the buzz of a takeover offer for Fisher and Paykel Appliances, the potential sale of its $US224 million-valued [$NZ251 million] finance business has been largely overlooked," the Wall Street Journal reported.

Heartland was created in January last year through the $2.2 billion merger of Marac Finance, Canterbury Building Society and Southern Cross Building Society, and went on to buy PGG Wrightson Finance Ltd.

It is waiting for a decision by the Reserve Bank on whether its application to become a bank has been successful.

An announcement from the bank is expected towards the end of November.

The Wall Street Journal said Appliance's finance arm had been a solid performer during the past five years, while Appliances business had struggled.

The finance division's revenue might be just a fraction of Appliances' revenue to March 31, respectively $139.7 million versus $891.5 million, but its earnings before interest tax and depreciation was $37.8 million, compared with just $7.5 million for Appliances.

-simon.hartley@odt.co.nz

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