Toi Foundation chairman says Heartland deal follows talks with multiple parties after an unsolicited approach in late 2024

The Toi Foundation, TSB's owner, spoke with multiple parties after receiving an unsolicited approach in late 2024 about the potential sale of TSB shares, chairman Chris Ussher says, with Heartland Group Holdings' proposal to buy TSB and merge it with Heartland Bank deemed the most compelling.

Ussher spoke to interest.co.nz after the proposed $620 million deal was announced on Tuesday morning.

"We've spoken with a number of parties. And we've probably spoken realistically with the kind of people you'd expect that we would have spoken with. But I'm not going to go into details as there are extensive confidentiality obligations around those," Ussher says.

He also wouldn't say whether the initial unsolicited approach in late 2024 came from Heartland.

"When we received the unsolicited approach, we thought there was a conversation to be had there. So we then commenced effectively a process of really testing the market. And at the end of that process, the Heartland proposal was the one that was the most compelling."

The Toi Foundation, a charitable trust, is seeking Taranaki community feedback on the proposal to sell 100% of the ordinary shares in TSB to Heartland Group, the parent company of Heartland Bank, in a deal valued at $620 million comprised of debt, equity and cash.

If the proposal proceeds, Toi Foundation would hold a 17.5% shareholding in Heartland Group. TSB and Heartland Bank would merge, with the merged bank renamed TSB Heartland Bank.

 Three quarters of trustees must approve deal

The Toi Foundation, formerly known as the TSB Community Trust, has a prescriptive process in its trust deed about consulting with the Taranaki public on the proposed sale, Ussher says.

It'll hold community information sessions in Hāwera, Stratford and New Plymouth this Friday, and is seeking written feedback, with feedback forms available from the Toi Foundation's website and reception.

"The reason for seeking written feedback, I guess, is to make sure that we actually are capturing the feedback. I mean, the problem is if you have oral feedback, you have conversations with people in the supermarket and stuff, and then it's like, well, when has someone given feedback and when haven't they given feedback?"

"We've got a four-week period during which consultation's open," says Ussher.

"I think the key message I would give to the community is almost it's not so much about what they think, it's about why they think it. Because unless I know why people think what they think, it's difficult to actually weigh that feedback in terms of our decision-making process."

He says any decision to sell shares in TSB requires a resolution signed by not less than three quarters of trustees.

"So functionally that's eight, I guess, out of 10 [trustees]," Ussher says.

Information on the Toi Foundation trustees, who are appointed by the Minister of Finance, can be found here. 

Although receiving a pure cash consideration would have been easier for the Toi Foundation, Ussher says this wouldn't have been an option with the Heartland proposal.

"[And] the vendor finance part of it, that works well for the Foundation from a tax perspective because the Foundation is exempt from tax. So bonds are an easy thing for the Foundation to own from that perspective."

Higher returns seen

The deal would create scale, and better returns for the Toi Foundation as a shareholder and as an investor in the business, which flows through to the Taranaki community.

"So if I put some context around that, our average dividend from TSB over the last five, 10 years has been in the order of $10 million per annum. The total return we would expect to see from the Heartland investment, including the cash consideration coming out of it, is in the order of $30 million."

"So it's a $20 million uplift in our total income as a Foundation, which obviously then flows through in terms of the philanthropic work that the Foundation does in the Taranaki community," says Ussher.

*The table below, from the Toi Foundation, provides an indicative guide to the expected returns that would be received from the merged bank, versus the status quo of a 100% shareholding in TSB.

* Notes:
HGH MERGER
• Interest rate yield is based on interest rates as at 21 April 2026.
• Cash yield is based on TSB’s current 1 year term deposit rate.
• Vendor Loan assumes Toi enter a swap to switch floating base rate exposure to fixed. Yield presented is therefore indicative. The loan has a 2 year term and is repayable at any time.
• The dividend range is based on Heartland’s target payout ratio of 50% of proforma LTM NPAT pre & post synergies. TSB SATUS QUO
• Average dividend over last 10 years (FY16 to FY25).

The Toi Foundation has also issued an  information booklet on the proposed deal. The information below comes from that.

While TSB’s long-term performance has been very good, more recent returns have been materially lower, and the level of investment in the bank required to meaningfully lift returns is substantial.

The Trustees are also mindful that Toi Foundation has concentration risk with large ownership stakes in TSB and Fisher Funds, and that diversification of investments is important to reduce potential volatility in returns and preserve capital long term.

As part of the process to date, Toi Foundation’s Trustees have undertaken a careful and comprehensive review of Toi Foundation’s investment in TSB. This included testing the market for potential partners or purchasers, assessing the status quo outlook, and considering how best to balance the needs of current and future beneficiaries, the need for diversifying our investment portfolio, optimising regional outcomes, and the future of TSB itself.

Importantly, this is not a process that has been driven by short-term considerations. It reflects a thoughtful assessment of how to:

• Take steps towards diversifying Toi Foundation’s investment risk for the next 40 years.

• Increase sustainable, long-term cash returns available for community distribution (through grant-making, investment and partnerships).

• Ensure TSB has a platform to continue operating successfully in a challenging banking environment. • Enable TSB to maintain a strong connection to Taranaki.

Overview

Toi Foundation is seeking Taranaki community feedback on a proposal to sell 100% of the ordinary shares in TSB to Heartland Group, the parent company of Heartland Bank, and receive an aggregate consideration of $620 million. This would be comprised of debt, equity and cash.

If the proposal proceeds, Toi Foundation would hold a 17.5% shareholding in Heartland Group. TSB and Heartland Bank would merge, with the merged bank renamed TSB Heartland Bank.

TSB and Heartland Bank have complementary strengths:

• TSB brings strong funding capabilities through its retail banking activities.

• Heartland Bank specialises in higher-margin lending products, such as reverse mortgages, in segments that do not directly compete with most other banks.

For banks, having scale has become increasingly critical to financial sustainability. Rising compliance costs, regulatory complexity, and technology investment all disproportionately affect smaller banks.

TSB Heartland Bank will be a challenger bank with increased scale and intends to retain a strong association with the Taranaki region with full-service capability. It would also be focused on delivering superior shareholder returns through its specialist, highvalue products as part of a larger retail bank.

Importantly for TSB customers, there would be no change to the range of TSB’s current products or services.

This payment structure means Toi Foundation would have:

1. A range of banking investments that provide a much greater degree of flexibility, liquidity and the potential to provide higher returns than is currently possible through its 100% ownership of TSB.

2. The ability over time, as loans (including Tier 2 capital) mature, to further diversify Toi Foundation’s investment portfolio.