Heartland Group Holdings has confirmed receipt of Toi Foundation trustee approval for its proposed TSB acquisition.
The proposed transaction remains subject to Heartland shareholder approval and any necessary regulatory approvals.
In an announcement to the NZX on Thursday, Heartland CEO Andrew Dixson described the Toi Foundation trustee approval as an “important milestone” in the transaction timeline.
“TSB Heartland Bank will be a stronger New Zealand challenger bank with the potential to deliver greater value for customers, shareholders and communities across New Zealand, including Taranaki,” he said.
“Heartland respects the importance of TSB’s connection with Taranaki and preserving this through the proposed merger. Taranaki will remain a key operational hub for customer-based banking services, including maintaining a local branch network and customer-facing roles in Taranaki. In recognition of each bank’s long history and deep connection to regional New Zealand, the Heartland Bank and TSB brands will be reflected in the merged bank’s name and branding strategies.”
Toi Foundation Chairman Chris Ussher said Toi trustees considered all eligible submissions alongside the independent and expert advice received and the Foundation's Trust Deed.
The Foundation received 1,159 submissions from Taranaki residents in the first submission period and 108 in the second. Trustees also sought additional independent and expert advice where necessary, particularly where submitters put forward alternative proposals.
“After considering all the information available to us, Trustees believe proceeding is the best long-term decision for Toi Foundation, the Taranaki community and TSB,” Ussher said.
The proposed transaction still remains subject to satisfaction of the remaining conditions in the merger implementation agreement (MIA), including Heartland shareholder approval and any necessary regulatory approvals.
Under the proposed transaction, Heartland will acquire from Toi Foundation all TSB shares on issue for an aggregate consideration of $620 million. The Toi Foundation would become Heartland's largest shareholder, with a 17.5% shareholding and one Toi Foundation nominee will be initially appointed to the Heartland Board.
It is also expected that on completion of the proposed merger, two existing TSB directors will initially join the TSB Heartland Bank Board.
When that is finalised TSB would merge with Heartland Bank to form TSB Heartland Bank. Heartland Group would remain the NZX/ASX listed parent company of TSB Heartland Bank.
Heartland said Taranaki will be a key operational hub for customer-based banking services, including maintaining a local branch network and customer-facing roles in Taranaki – alongside Heartland Bank’s existing nationwide presence.
'Heartland Group Holdings is the best deal'
Ussher said Toi Foundation was aware of comments in the market from other parties.
Over the course of the past week, David McLean, Kiwi Group Capital's Chairman, has come out and offered the Toi Foundation an alternative to the proposed sale of TSB to Heartland.
“In the interests of addressing speculation, I can confirm that Toi Foundation proactively engaged with a range of parties at the beginning of this process, but following some initial information sharing, not all elected to make an offer,” Ussher said.
“From the proposals we received, Heartland Group Holdings is the best deal. This is both in terms of value and – given TSB and Heartland’s complementary strengths – in meeting key concerns for the community, such as job retention, branch retention and TSB presence in the Taranaki region. We also believe that the Heartland Group Holdings proposal is a better option than retaining TSB as a standalone bank in Toi Foundation ownership.”
Ussher said the sale of TSB to Heartland will enable Toi Foundation to accelerate diversification of its investment portfolio, increase sustainable, long-term cash returns available for community distribution, and ensure TSB can continue operating successfully in a “challenging banking environment” while still maintaining a strong connection and presence in Taranaki.
Toi Foundation forecasts that its average annual total return to the community could increase to approximately $50 million per year over time, up from the current level of approximately $30 million per year.
Heartland says on Monday, August 31, it expects to submit its Reserve Bank application for the deal, and send the notice of meeting for its Special Shareholder Meeting to Heartland shareholders.
Meanwhile Kiwibank shareholder Kiwi Group Capital, David McLean had expressed an interest in a Kiwibank-TSB tie-up, said it believes in continuing to build a stronger New Zealand-owned banking alternative and will continue to consider opportunities that support that objective.
"Our focus remains on supporting Kiwibank's continued growth and the important role it plays in increasing competition and delivering better outcomes for Kiwi," Kiwi Group Capital said.
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