KEY POINTS:
Wizard Home Loans, one of New Zealand's largest non-bank home lenders has been put up for sale by its parent, GE Money.
GE Money says it is "considering strategic options" for Wizard, including a partnership, joint venture or sale. During the process it will keep offering
loans and existing services to new and current customers.
GE Money Australia and NZ Chief Executive Mike Cutter described the sales process to The Australian newspaper.
"A different ownership structure will allow GE Money to make the best use of capital and focus on higher returning segments that better leverage our core strengths," Cutter told the newspaper. He denied a fire sale was planned and said that GE Money would not sell Wizard for less than it bought it.
GE Money bought Wizard and Australian Financial Investment Group for A$500 million five years ago. "We think there has been a significant amount of equity built over the four years we've owned the business," Cutter was quoted as saying. "Consequently we would expect to see a return on that investment."
He said Wizard was a strong consumer brand that was well positioned in a highly competitive market.
"We believe Wizard's strong brand identity and successful franchise model may be of more value under an alternative ownership structure."
"Rather than change the Wizard proposition, we will review alternatives that will allow Wizard to continue to provide New Zealand borrowers with competitive products and finance solutions based on its current business model."
Australia and New Zealand are the only countries in GE Money globally that used a franchise model.
The Australian newspaper has reported that Wizard founder and chairman
Mark Bouris has spent the past three months devising a plan with franchisees to take back control of the company he and James Packer sold less than four years ago to GE Money for more than $500 million.
Bouris was believed to have asked Wizard Home Loan's owner, GE, to pay him millions of dollars and give him a significant stake in the company in return for him taking back the business and running it. The plan was to sell it in an Initial Public Offering (IPO) when the market improves.
The Australian says it understands that Bouris's plan could be derailed by the GE decision to put Wizard up for sale.
The Australian says problems at Wizard began last year, around the time of the sub-prime crisis, when the cost of debt increased, mortgage lending started falling, and its US parent issued draconian directives to the branches to tighten up credit policies and reduce risk.
In an item posted on its website last year, Wizard said that that being part of GE Money meant it was well placed and not affected by the same tough conditions facing other finance companies.
Because it was part of GE, funds did not need to be raised from the public.
Wizard began in NZ in 1999, when it opened its first branch in New Lynn, Auckland. It says it is New Zealand's "leading non-bank lender" with more than 40 branches across the country.
Former All Black Grant Fox has been the public face of the company, appearing in its advertising and promotional material.
It is predominantly a residential mortgage lender with a range of financial products, including loans for first home buyers, construction, refinancing and commercial projects. It also offers insurance. Wizard says it does not lend money for "sub-prime" or other high-risk lending.
- NZ HERALD, INTEREST.CO.NZ