Heartland shareholders approve $620 million TSB Bank takeover

Heartland Group shareholders have overwhelmingly approved a $620 million deal to acquire TSB Bank and merge it with Heartland Bank. The vote, held on Wednesday, saw 94.80% of votes cast in favor, with shareholders representing 58.09% of Heartland's issued capital participating. The transaction involves Heartland purchasing all TSB shares held by the Toi Foundation and merging the two banks into TSB Heartland Bank, pending approval from the Reserve Bank of New Zealand (RBNZ).

The deal will create a larger New Zealand bank with approximately $15 billion in assets. Heartland chair Greg Tomlinson highlighted that the combined entity will have greater capabilities than either bank could achieve alone. Chief executive Andrew Dixson noted that the merger will significantly increase the New Zealand asset base by about 171%, helping to cover technology, risk management, and compliance costs that disproportionately affect smaller banks.

Payment for the deal includes new shares, vendor loans, and subordinated debt, with no cash involved. Shareholders approved issuing 200 million Heartland shares to Toi at $1.25 each, making the foundation a 17.5% shareholder. Independent expert Calibre Partners assessed the price at about 0.76 times TSB's book value, concluding that the benefits outweigh the negatives. Heartland expects synergies of about $34 million to be fully realized over three years, with the deal immediately boosting per-share earnings and dividends.

TSB's home loan book stood at $6.5 billion as of 30 June, which Heartland CEO Andrew Dixson said will provide scale in home loans that Heartland could not achieve organically. The merger is also expected to lower funding costs and increase competition for reverse mortgages. However, regulatory steps remain, as the RBNZ required TSB to commission an independent report on its capital and liquidity ratios, with findings due in November. Heartland aims to complete the deal by December.