Heartland buys reverse mortgage firm
Heartland Bank says its decision to invest $87 million in a reverse-mortgage businesses is consistent with its strategy of pursuing niche lending opportunities.
The fledgling bank was placed in a trading halt on the NZX this morning, pending the announcement that it would buy Sentinel New Zealand and Australian Seniors Finance from Seniors Money International (SMI).
Sentinel is the biggest provider of reverse mortgages in New Zealand, with a market share of about 80 per cent.
Australian Seniors Finance is the biggest non-bank reverse-mortgage provider in Australia, with about 20 per cent of the market.
Reverse mortgages, also called "home equity release", are loans taken by the elderly in order to tap into some of the equity they have in their homes.
The money borrowed plus interest accrued is paid back when the occupier either dies, or voluntarily leaves their house.
With 635,000 New Zealanders aged over 65, Heartland said there was "significant unsatisfied demand" for the service.
Heartland shares rose 2.3 per cent to 91 cents following the announcement, and are up 26 per cent over the last 12 months.
The deal, which will be settled on April 1, is conditional on a range of factors including SMI receiving shareholder approval.
It will be financed by $48.3m in cash, along with the issue of $38.7m of shares to SMI at 90c each.
Heartland will raise $20m to partially fund the cash portion of the payment, which will come from a $15m equity placement and a $5m share-purchase plan.
Just over 17 million new shares will be issued to large investors at 88c each, with allotment and settlement on February 18.
Existing Heartland shareholders will also be eligible to invest a minimum of $2500 and a maximum of $15,000 in newly issued shares.
The issue price will be the lower of the equity placement price, reduced by any cash dividends paid, or a 2.5 per cent discount to the stock's market price in the five days to March 19.
Heartland has also updated its forecasted profit ahead of releasing it financial results later this month.
Interim profit after tax is expected to be about $16.5m, in line with the forecast full-year profit of between $34m and $37m.
The full-year profit for 2015 is forecast to be between $42 and $44m, taking into account the costs of the integration.
The bank said more detailed financial information would be available once the acquisition was finalised.
Heartland had earlier signalled that it was looking at takeover targets to expand its business, after setting up an acquisitions unit late last year.