3 mins to read

PGC bank merger open to further consolidation

Pyne Gould Corporation says three key factors underlining the proposed merger of its banking business with the Canterbury and Southern Cross building societies should see the new entity's asset base doubled in five years.The South Island-based finance com

Robert Smith
Tue, 01 Jun 2010

Pyne Gould Corporation says three key factors underlining the proposed merger of its banking business with the Canterbury and Southern Cross building societies should see the new entity’s asset base doubled in five years.

The South Island-based finance company revealed today that it had signed a memorandum of understanding with the building societies for a merger that will see it debut with an initial asset base of $2.2 billion.

In announcing the merger today, Pyne Gould Corp said one of the aims of the new business was to more than double that asset base in five years

Chief executive Jeff Greenslade told NBR there were three factors that inspired that goal.

“All of the parties involved strongly believe the economy is turning around and the we will benefit from upward swing, while we expect our heartland focus will see more people come to us for their banking services because of the obvious benefits of a larger group.

“And the third factor is that we are keeping an open mind over further consolidation. There are plenty of opportunities out there for this, so if the right one comes along, we’ll certainly take a good look at it.”

Mr Greenslade emphasised there were only plans to merge with just the two building societies already announced but that he did anticipate that the new merged entity would “become a magnet” for further consolidations.

He said the three businesses had been circling each other for some time, but had begun talking to earnest in the past three months.

“The interesting thing is that all three of us came to the same broad conclusions at about the same time. We all independently decided we were after the same thing and each of us was on the other’s shopping list.”

Long term plan

Pyne Gould Corp has been planning to turn its subsidiary into a bank since 2008 and today’s announcement of the merger has seen the finance company predict that it will finally be in place by mid-next year.

Mr Greenslade said the merger would give the company a critical mass to obtain a banking license and that the goal of finally reaching its aim by this time next year was realistic.

“We are the master of our own destiny when it comes to the timeline, but we have got the flexibility and determination to get there, so there is little reason why it should take much longer than that.”

Details over the make-up of the new companies is still to be determined, with each business about to move into the due diligence phase.

Under the proposed plan the two building societies would merge, followed by the acquisition of the Marac business, with Pyne Gould Corp taking a large stake in the new business as its payment.

Mr Greenslade said the next phase of the merger would see valuations carried out to determine the proportion of shareholding. While it was too early to say how big Pyne Gould Corp’s stake would be, he said it would be the largest shareholder in the new entity.

Mr Greenslade added that each of the businesses had a strong credit rating and he did not expect any impaired loans to be a significant factor in the new enterprise.

Pyne Gould Corp has already shuffled much of its impaired loans out of Marac and into the Torchlight business, but Mr Greenslade said that any movement of further assets into or out of Marac would be for portfolio reasons, rather than because they are impaired.

He said the new business was the finance company’s best opportunity to develop strong market presence across the country, with a particular focus on the Canterbury region.

“Each of the units have good representation across the country and have got a very strong base within various communities, which is why we are concentrating on the heartland business, which has always been Pyne Gould’s main focus.”

Robert Smith
Tue, 01 Jun 2010
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
PGC bank merger open to further consolidation