Heartland Group Holdings Limited (ASX: HGH) has announced a conditional merger implementation agreement to combine its New Zealand entity, Heartland Bank Limited, with TSB Bank Limited. Heartland Group Holdings Limited is an Australasian financial services group providing specialist banking products to New Zealanders and Australians, operating as the listed holding company for Heartland Bank in New Zealand and Heartland Bank Australia. Under the proposed transaction, Heartland will acquire all TSB shares from Toi Foundation for an aggregate consideration of $620 million (NZD). Immediately following the acquisition, Heartland Bank and TSB will merge to create TSB Heartland Bank Limited, positioning it as a challenger bank of scale with a regional focus in New Zealand.
The merger is designed to increase banking competition and choice for New Zealanders. TSB Heartland Bank will combine Heartland Bank’s specialist product expertise with TSB’s cost-effective funding platform and transactional banking capabilities. This integration is expected to result in a full-service capable bank offering differentiated specialist products with a lower risk-weighted portfolio. The combined entity is projected to become New Zealand’s seventh-largest bank, boasting approximately $15 billion in total New Zealand assets. Material synergies are anticipated to be progressively realised over a three-year period post-completion, expected to deliver an ongoing ~$34 million p.a. benefit to pre-tax profit, driving material normalised earnings per share accretion for Heartland shareholders alongside an enhanced dividend profile.
The $620 million consideration to Toi Foundation includes ordinary equity in Heartland, resulting in a 17.5% shareholding, a pre-completion cash dividend from TSB, a vendor loan provided to Heartland by Toi Foundation, and Toi Foundation subscribing for Heartland Bank Tier 2 capital. Subject to Heartland shareholder approval, one Toi Foundation nominee is expected to join the Heartland Board, and two existing TSB directors are anticipated to join the TSB Heartland Bank Board. The proposed merger is targeting completion in December 2026, contingent on conditions such as community consultation by Toi Foundation with Taranaki residents, Heartland shareholder approval, and necessary New Zealand and Australian regulatory approvals. Transaction costs are estimated at approximately $15 million, expected to be expensed across the financial years ending 30 June 2026 and 2027.
