The conditional agreement would see Heartland Bank's parent Heartland Group buy all of TSB's shares for $620 million from TSB's parent, the Toi Foundation, to create TSB Heartland Bank.
"Our commitment to specialist products remains unchanged - this will simply be enhanced by full-service capabilities in New Zealand," Heartland Group chief executive Andrew Dixon said.
"By combining Heartland Bank's specialist product expertise with TSB's cost-effective funding and everyday banking services, we'll be able to offer more New Zealanders a better value banking alternative," he said.
"As a larger bank, TSB Heartland Bank will be in a stronger position to keep investing in products and technology, while supporting the delivery of improved financial returns for our shareholders."
Dixon said the scale of the combined banks would increase its financial resilience and ability to compete.
"As the NZX/ASX-listed parent company of a larger, more efficient New Zealand banking business, Heartland will be able to deploy capital more effectively across the group, and have the scale needed to deliver a stronger cost-to-income ratio through greater operating leverage."
He said the scale and product diversification may also support an uplift in the merged bank's long-term credit rating.
The details
Subject to regulatory and shareholder approvals, the merger was expected to be completed by the end of the year.
"Material synergies are expected to be progressively realised over a three-year period post-completion by reducing shared costs across TSB Heartland Bank," the parties said in a market statement.
"Synergy realisation and the transaction structure are expected to drive material normalised earnings per share accretion for Heartland shareholders, alongside an enhanced dividend per share profile."
The aggregate consideration to Toi Foundation of $620m represented 76 percent of TSB's book value and would be comprised of ordinary equity in Heartland, resulting in a 17.5 percent shareholding in Heartland by Toi Foundation.
In addition there would be a pre-completion cash dividend paid by TSB, a vendor loan provided to Heartland by Toi Foundation, and Toi Foundation subscribing for Heartland Bank Tier 2 capital.
Subject to Heartland shareholder approval, a Toi Foundation nominee would be initially appointed to the Heartland Group Board from completion of the proposed merger.
Two existing TSB directors would initially join the TSB Heartland Bank Board.
Transaction costs were estimated to be about $15m, including $7m, which would be included in Heartland Group's full year net profit for the year ending 30 June.
The balance of $8m will be expensed in the net profit the following year.
This story was first published on rnz.co.nz |  |
