NZ’s Heartland seeks $210 million to buy Australian bank Challenger to expand across Tasman

Heartland Bank is buying Austalia's Challenger.

Heartland Bank is looking to raise $210 million to buy Australia’s Challenger Bank after getting the go-ahead from regulators on both sides of the Tasman.

The company said it had received “indicative” regulatory approvals from the Australian Prudential Regulation Authority (Apra) and the Reserve Bank of New Zealand (RBNZ) for the acquisition of Challenger.

The equity raise comprises a $105m underwritten institutional placement and a $105m underwritten one for 6.85 accelerated non-renounceable entitlement offer.

Apra and RBNZ’s final regulatory approvals are conditional on the successful completion of the placement and offer.

In addition, Heartland said CEO Jeff Greenslade would step down after 15 years at the end of this calendar year.

“The acquisition is a critical step in Heartland’s strategy for expansion in the Australian market and achieving its long-term growth ambitions,” Heartland said.

Heartland is already well-established in Australia through Heartland Australia.

In 2023, together, Heartland’s Australian reverse mortgage and livestock finance businesses had approximately $2 billion of gross finance receivables.

Heartland signed a conditional deal in October 2022 for the purchase of Challenger - a long-established authorised deposit-taking institution, which offers customers a range of savings and lending products in Australia.

Subject to completion, Heartland’s existing reverse mortgage and livestock finance businesses in Australia will be transferred to sit under Challenger Bank, and the bank will be rebranded to Heartland Bank Australia, the company said.

The acquisition of Challenger Bank was strategic for Heartland, providing immediate access to lower cost deposits in Australia to complement existing and successful wholesale funding capability.

Heartland said the board expects to target a total dividend payout ratio in the financial year ending June 30, of 50 per cent of underlying net profit after tax.

Greenslade saw through the formation of Heartland in 2011, and the receipt of Heartland Bank’s RBNZ banking registration in 2012.

“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,” the company said.