June 24 – Heartland New Zealand Ltd.’s proposed $100 million acquisition of PGG Wrightson Ltd.’s finance unit under-values the transfer of a loan book of $491million, says John Hawkins, chairman of the NZ Shareholders’ Association.
Heartland, the lender built from the merger of Marac Finance and Canterbury and Southern Cross building societies, is making a grab for rural customers with the purchase, which will lift its rural lending exposure to 21% from 6%-to-7% currently.
Hawkins says the deal is “another related party transaction of the type which has almost knee-capped our leading rural servicing business over the past five years at a time when NZ agriculture is enjoying record returns.”
The association “questioned how a modestly profitable asset that brings with it a large pool of performing loans, market dominance and significant funding lines could fail to fetch any goodwill at all,” the statement said.
Heartland wants about a third of its loan book in rural loans, chief executive Jeff Greenslade has told .
The deal would lift Heartland’s loan book by about a fifth to $2.6 billion.
The loans have already been purged of low-quality agreements.
Wrightson is carving out some $96.5 million of loans into a special purpose vehicle to refinance or realise those assets in the short- to medium-term, and will provide a $30 million guarantee on certain loans sold to Heartland. According to Wrightson’s first-half results, impaired and past due loans amounted to $111.6 million.
The transaction price “seems extraordinarily pessimistic when PGW are transferring a loan book of $491million with all the doubtful liabilities removed or guaranteed by PGW,” Hawkins said.
Heartland stock was unchanged at 70 cents.
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