Heartland to buy PGG Wrightson Finance

Heartland New Zealand, which is seeking a banking license, says it has agreed to the conditional purchase of PGG Wrightson’s finance operation for an expected $100 million.

The deal, which is subject to regulatory, shareholder and deposit holder approval, would see Heartland acquiring selected PGG Wrightson Finance assets totaling approximately $400 to $430 million.

About $95 million of certain loans would be transferred to a wholly owned PGG Wrightson special purpose vehicle, which would then work to realise or refinance these facilities in the short to medium term.

In addition, about $30 million of PGG Wrightson Finance’s receivables would be subject to a guarantee from PGG Wrightson, now majority owned by Chinese interests.

Heartland was recently formed from the merger of Pyne Gould Corporation’s (PGC) former subsidiary Marac Finance and two buildings societies.

The PGG Wrightson finance book would give it an asset base of about $2.6 billion.

Heartland to raise capital
If the PGG Wrightson deal is approved Heartland will seek to raise a minimum of $55 million to maintain “acceptable levels of capitalisation”.

“This will be done by a combination of private placement and a Share Purchase Plan (“SPP”). Placements for $20 million at 75 cents per share are agreed with PGW ($10 million) to underpin the strategic alliance with Heartland and a further $10 million with PGC,” Heartland said in a stock exchange filing. 

Heartland said PGC had also agreed key terms to participate with another party (who has given commitments as to volume subject to final documentation), which means that Heartland expects to have the minimum level of $55 million of the capital raising and SPP underwritten.

Bond holders to vote
PGG Wrightson said the finance arm was not its core business and the sale was backed by its majority shareholder Agria.

The company said if the transaction proceeds, its $92 million of bonds (NZX: PWF040) will become liabilities of Heartland Building Society.

On completion, the bonds of PWF will be delisted from the NZX and shortly after relisted under a new stock code.



Bondholders will soon receive a notice of meeting to approve the transaction and supplemental materials to that notice of meeting, including an independent appraisal report currently being prepared by Northington Partners.

Strategic fit
PGG Wrightson chairman Sir John Anderson said the transaction, which had taken a number of months to conclude, had ticked all the right boxes.

''Not only will the proposed transaction have the impact of seeing PWF form part of a much larger financial institution that specialises in many of the markets that PWF operates in, but it will also significantly deleverage and de-risk PGG Wrightson's current financial position.''

Heartland chief executive Jeff Greenslade said the acquisition was forecast to increase earnings per share and provide opportunities for growth.

''We have factored the acquisition in to our banking licence application process, which remains on track.''