The New Zealand-based firm confirmed in an ASX filing on Monday it has received the green light from the Australian Prudential Regulation Authority (APRA) and the Reserve Bank of New Zealand for its acquisition of Challenger Bank from Challenger.
Alongside the approval, Heartland also announced a NZ$210 million equity raise, the successful completion of which the regulatory approvals are conditional on.
The firm confirmed that proceeds from the raise will fund the remaining consideration for the acquisition, as well as support for anticipated regulatory capital needs and accommodate projected near-term asset growth.
Challenger first announced it had signed a share sale agreement with Heartland Group to offload its banking arm for approximately $36 million back in October 2022.
At the time, it said that a strategic review had concluded that a sale was the best option for the bank.
“We have conducted extensive analysis and considered the future strategic value of the bank and its ability to contribute to Challenger’s purpose of providing our customers with financial security for a better retirement,” said Challenger chief executive officer Nick Hamilton.
“The sale will allow us to focus on our life and funds management businesses and leverage the scale we can achieve through strategic partnerships.”
At the time, it was also understood that the $36 million purchase price was around $11 million in excess of the bank’s net assets of approximately $25 million.
After the acquisition, now slated for completion on 30 April 2024, Heartland announced plans to transfer Heartland Australia Holdings and its subsidiaries, including the Australian Reverse Mortgage business and Livestock Finance Business, to Challenger Bank.
The acquisition is described as a “critical step” in Heartland’s strategy for expansion in the Australian market.
“To accelerate growth in Australia, Heartland will leverage Challenger Bank’s foundation and funding platform, Heartland’s successful track record in Australia, and its New Zealand product and distribution expertise. This will enable Heartland Bank Australia to expand into new product segments in which Heartland Bank has specialist expertise in New Zealand, such as Motor Finance and Asset Finance,” the firm said.
Expansion, Heartland noted, will be enabled through access to retail deposits, allowing the firm to optimise the advantage of a lower cost of funds.
“Challenger Bank continued to actively raise deposits ahead of being acquired by Heartland Bank and will continue to do so following completion,” the firm said.
The firm also announced on Monday that after 15 years at Heartland, Jeff Greenslade intends to step down from his role as CEO at the end of this calendar year.
“Post-completion, Jeff’s focus as CEO will be on the strategic transition of Heartland in its role as a listed parent company of banks in two jurisdictions, the integration of Challenger Bank into the group and the continued development of Heartland’s business in Australia,” Heartland said.
Moreover, it noted that Geoff Summerhayes will be appointed chair of the new Heartland Bank Australia board while Michelle Winzer will serve as CEO of Heartland Bank Australia with a start date yet to be confirmed.
“Michelle will join Heartland Bank Australia from her role as chief executive banking of RACQ Bank in Queensland. Michelle will bring more than 30 years’ experience in banking and financial services, including as chief executive officer of Bank of Melbourne and senior roles at Bankwest, the Commonwealth Bank of Australia, and Westpac.”
