Heartland to buy ‘home equity release’ business for $87M, to raise $20M from shareholders
Feb 14 (BusinessDesk) – Heartland New Zealand, which gained a banking licence just over a year ago, has agreed to buy a
‘home equity release’ mortgage business from buyout firm Quadrant Private Equity for $87 million in cash and shares and
plans to raise $20 million of that from shareholders.
Home equity release (HER) products target the elderly, allowing them to draw against the equity in their home. Similar
products have been called reverse mortgages and deferred settlement schemes. Typically, the borrower doesn’t pay
interest and the mortgage is settled when they vacate.
Heartland has signed an agreement with Seniors Money International, majority-owned by Quadrant, to buy its HER
businesses in Australia and New Zealand. The sale is conditional and would be settled on April 1.
The acquisition “provides Heartland with the product capability to meet the needs of the 65-plus demographic, which is a
growing demographic and is typified by those with the majority of their personal wealth tied up in their primary
residential dwelling,” the bank said in a statement.
Under the deal, Heartland would acquire Sentinel New Zealand, the nation’s biggest HER mortgage provider with about
4,050 loans, and Australian Seniors Finance, which has 20 percent of that market and 4,250 loans. The aggregate value is
about $760 million including $30.5 million of HER loans bought by Heartland last December.
The acquisition will be funded with $48.3 million of cash, made up of the capital raising and existing cash on the
balance sheet, and by the issue of $38.7 million of shares at 90 cents apiece, it said.
The capital raising is by way of a $15 million placement and $5 million share purchase plan and the company said it has
commitments from new and existing investors for the placement, which would be at 88 cents a share. The shares last
traded at 90 cents, up 1.1 percent on the day, having been halted for the announcement.
Heartland said HER loans are “an ideal response to demographic and economic realities – an aging population with much of
its wealth invested in real estate.”
The acquisition is expected to add $8 million to $9 million to profit in the first full year following integration, with
profit in 2015 of $42 million to $44 million, including costs associated with the purchase and integration of the
businesses.
The company is scheduled to release its first-half results on Feb. 25 and said today it would be a profit of about $16.5
million, putting Heartland on track to meet its full-year forecast of $34 million to $37 million.
(BusinessDesk)