Heartland to amalgamate businesses, flags possible $100m capital return

Heartland New Zealand [NZX: HNZ], the listed bank, will amalgamate all its businesses, including its senior finance unit and Harmoney Corp investment, in a bid to simplify its corporate structure, and has signalled plans to return up to $100 million to shareholders.

The Auckland-based lender is the product of the 2011 merger of Canterbury and Southern Cross building societies with Marac Finance, the corporatisation of what was then Heartland Building Society and a number of acquisitions, it said in a statement. The complicated business structure has meant, among other things, that wholly-owned subsidiary Heartland Bank is required to have a separate board of directors from its NZX-listed parent.

The company plans to bring all of its operations under a single roof, merging the companies and changing the listed parent's name to Heartland Bank. It will bring its Australian reverse mortgage business, Heartland Seniors Finance, Marac Insurance and also its 10% stake in peer-to-peer lender Harmoney and 11% stake in marketing business Ora HQ, all under a single umbrella.

The bank plans to raise $50 million, with the possibility of a further $25 million in oversubscriptions, via a tier 2 capital instrument to bolster its balance sheet and make its capital structure more in line with that of New Zealand's other registered banks. After the tier 2 capital issue, the bank will have more cash on its books than required by the Reserve Bank and it plans to return excess capital to shareholders by way of a share buyback.

Pending the success of the tier 2 capital raise, Heartland will seek shareholder approval at its upcoming annual meeting but said the range would be between $58 million, which is 10% of the bank's average market capitalisation over the last 20 days, and $100 million.

The capital return is also dependent on any acquisitions. Heartland has expressed interest in Motor Trade Finance, saying last month it may pay $1.50 a share for between 10 percent and 20 percent of the Dunedin-based auto-lender. It also reaffirmed its interest in a full takeover provided it can reach agreement with the finance company's board.

Heartland shares rose 0.8% to $1.27 and has gained 12% since the start of the year.

(BusinessDesk)