At the end of September, Allied announced it had completed $7 million of capital raising from an unnamed outside investor.
That deal would be represented by a combination of debt, convertible notes, perpetual bonds and warrants issued by Allied Farmers and Allied Nationwide Finance to Resimac, Allied chairman John Loughlin announced at his company's annual meeting in Hawera.
In addition, Resimac chief executive Warren McLeland would join the Allied Nationwide board, and further Resimac board appointments and management collaboration arrangements were likely later.
However, Craigs Investment Partners broker Chris Timms wondered if any shareholders attending the annual meeting sat there shaking their heads in wonder at the changes to what was a traditional rural-servicing business.
"I could be wrong, but it makes you want to take a very wide berth. They have moved away from their core business. They have always had an involvement with the finance sector, but this deal changes it significantly."
Now, Allied wanted to take over the business of Hanover Finance and United Finance, two companies not renowned for their involvement with the rural sector, he said.
The plan was ambitious and Allied was painting a positive picture, but looking at the deal, there seemed a "fair amount of risk" associated with it, Mr Timms said.
Mr Loughlin said the link with Resimac was intended to assist in the objective of significantly expanding the finance business and would be valuable in the bid to acquire and subsequently manage the assets of Hanover Finance and United Finance, announced on November 18.
"This forms an important part of the `go forward' for Allied Farmers."
If the deal with Hanover and United went ahead, Allied Nationwide would develop into one of the leading non-bank lenders in New Zealand, Mr Loughlin said.
"It's our simple object to see Allied Nationwide Finance become the best-capitalised finance company in New Zealand, and the Resimac alliance is an important first step towards that."
Allied's strategy had been to have a rural business and a finance business that were linked by the provision of rural finance to its farming customers, he said.
The turmoil in the non-bank finance sector, and then the global financial industry, had yet to deliver the strong linkage in the way intended.
Allied remained of the view that a valid strategy was to connect the businesses in that way and that it could achieve a "quality" rural book as part of its lending business.
Some progress had been made recently, Mr Loughlin said.
The other thing Allied was seeking to achieve was diversity of income streams.
"For some time, our rural business carried our operations while the New Zealand finance sector went through difficult times and there was a first round of rationalisation.
"The global financial crisis spilled over from the financial markets to the real economies of the world and produced dramatic volatility in the process, for hard and soft commodities."
Shocks of that kind were impossible to predict and diversify against.
Allied Nationwide Finance had tracked broadly to budget for the first four months of this financial year and had experienced no big negative surprises, he said.
It still had work to do with customers who were finding things tough, but that was the nature of the business at this difficult time.
At a glance: Resimac
- Established 24 years ago by the New South Wales state government with many of Australia's largest financial institutions as shareholders.
- The New South Wales government sold its holdings in 2003 and the major shareholder is now Ingot Capital Management Pty.
- The company has completed 16 offshore and domestic public issues since 1998.
- It has $A3.5 billion ($NZ4.3 billion) of funds under management.
