NZ banking group to buy StockCo Australia

James Nason, April 1, 2022

Livestock finance provider StockCo has this morning announced that its shareholders StockCo NZ and Elders have entered into an agreement with NZ banking group Heartland Group Holdings Limited under which Heartland will acquire StockCo’s Australian business.

The acquisition is subject to the completion of certain conditions, and is expected to be complete by the end of May 2022.

StockCo has been providing niche livestock finance to Australian livestock producers since 2012 in Australia, and 1995 in New Zealand.

StockCo is somewhat of a pioneer in livestock finance, being the first company to commercialise and scale up the funding to 100 percent of the purchase price of livestock, allowing producers the ability to maximise their return on assets by generating profits without any capital outlay toward the purchase of the stock.

Heartland is a dual listed financial services provider on the New Zealand Stock Exchange (NZX) and Australian Stock Exchange (ASX) under security code HGH, with a banking licence in New Zealand.

It offers products in Australia and New Zealand with a history stretching back to 1875.

In New Zealand, Heartland Bank provides Business Loans, Home Loans, Car Loans, Reverse Mortgages, Savings & Deposit options and Livestock Finance.

Heartland Bank also understands and has a relationship with StockCo through financing the operations of StockCo New Zealand for over 10 years.

Heartland Finance is Heartland’s Australian brand which offers Reverse Mortgages and Small Business Loans in Australia.

“Our strategic partner, Elders, have been crucial in the process, ensuring that Heartland, Elders and StockCo will have a close and strong working relationship. It will be very much business as usual moving forward for our clients”, said Doug Snell, CEO of StockCo Australia.

“Heartland’s acquisition of StockCo is extremely positive, providing StockCo the balance sheet, appetite, desire and capital to grow the business through new clients and increased financial support to existing clients.  Under Heartland’s ownership of StockCo, we will continue to support the livestock sector across Australia, where we assist participants to access capital and generate profits for their businesses.”

Heartland Group statement

In a statement to the NZX this morning Heartland Group Holdings Limited confirmed that it has signed conditional sale documentation for the acquisition of StockCo Holdings 2 Pty Ltd from its current shareholders StockCo Australia Holdings Limited (70 percent) and Elders Rural Service Australia Limited (Elders, ASX: ELD) (30 percent).

The acquisition also includes Heartland’s purchase of 100 percent of the shares in StockCo Australia Management Pty Limited (together with StockCo Holdings 2 Pty Ltd, StockCo Australia).

StockCo Australia is a company specialising in livestock finance for cattle and sheep farmers across Australia (60pc cattle/35pc sheep) with total assets of A$341 million and a leading position in the market, estimated to be A$7 billion.

Heartland Group Holdings Ltd says its  strategic vision is to create sustainable growth and differentiation by providing ‘best or only’ products delivered through scalable digital platforms.

This acquisition will extend Heartland’s ‘best or only’ strategy in Australia, by broadening Heartland’s Australian offering in an area where it already has expertise.

StockCo Australia’s livestock finance business will add to Heartland’s existing A$1.2 billion Australian Reverse Mortgage business which has the largest market share of active participants .

In New Zealand, through Heartland Bank Limited, Heartland currently provides various rural loan options, including online finance for sheep and cattle farmers, and livestock finance similar to that of StockCo Australia.

As part of the acquisition, Elders will divest its 30pc equity stake in StockCo Holdings 2 Pty Ltd, but will continue as a key distribution partner, entering into a new exclusive distribution agreement commencing on completion of the share sale, pursuant to which it will continue to distribute StockCo Australia products to Elders’ clients. That agreement has an initial term of five years on substantially equivalent key commercial terms.

The completion of the acquisition remains subject to execution of a new operational funding facility and other conditions which are customary for a transaction of this size and nature. The sale is expected to complete by the end of May 2022.

The total acquisition cost is A$143 million, plus a potential top-up of A$11 million (based on specific performance metrics being achieved in relation to the new operational funding facility). Heartland’s intention is to fund the total acquisition cost in the short term through new debt facilities provided by a major Australasian financial institution.

Heartland will provide a further update upon completion of the transaction, or if any other material information occurs prior to that time.

The transaction is expected to contribute additional annual net profit after tax of A$10 million to A$12 million, before any ongoing cost of acquisition debt funding. At this stage, given timing of the acquisition and the transaction costs, there is no change to Heartland’s market guidance for the financial year ending 30 June 2022 (FY2022).

 Elders statement

In a statement to the ASX Elders Limited said it has entered an agreement to sell its 30pc equity stake in StockCo Holdings 2 Pty Ltd (StockCo Australia) to Heartland Group Holdings Limited (ASX: HGH).

Elders’ sale is in conjunction with StockCo Australia’s 70% shareholder divesting its equity to Heartland.

The sale is expected to complete by the end of May 2022.

“Elders will enter into a new exclusive distribution agreement with StockCo Australia, commencing on completion of the share sale, pursuant to which it will continue to distribute StockCo products to Elders’ clients.

“That agreement has an initial term of 5 years with no change to key commercial terms. Elders’ $15m shareholder advance to StockCo Australia will be repaid on completion. Elders will book a non-underlying profit on sale of approximately $15m to $20m.

“The profit and loss implications to Elders of the sale on an on-going basis are immaterial.”

Managing Director and CEO of Elders, Mark Allison, said, “This sale is of significant benefit to Elders. Under Heartland’s ownership, StockCo Australia has the opportunity to further develop its business and its access to competitive funding as part of a dedicated financial services organisation. Importantly, Elders’ clients should notice no difference from the change of ownership and will continue to access StockCo’s excellent products through Elders under the terms of the distribution agreement with Elders. We are excited about the potential of these new arrangements for our livestock clients.”

The transaction is subject to several conditions precedent including some that are not in Elders’ control. The transaction contains customary warranty and restraint provisions.

About Heartland Group

Heartland is a financial services group with operations in Australia and New Zealand. Heartland has a long history with roots stretching back to 1875, and is listed on the New Zealand and Australian stock exchanges (NZX/ASX: HGH) with a market cap of approximately NZ$1.3 billion. In Australia, Heartland’s main business is in reverse mortgages where it is a market leader.

Heartland is focused on delivering financial solutions through speed and simplicity, particularly via digital platforms which reduce the cost of onboarding and make it easier for customers to open accounts or apply for funds when they need it.

Sources: StockCo, Heartland Group Limited, Elders Limited


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