Dominion buys North South

Terry Butler

Dominion Finance has made good its intention to grow through acquisitions, agreeing yesterday to buy up-and-coming rival North South Finance for almost $40 million in cash and new shares.

North South shareholders - Daryl Eastgate, Ross and Brett Lornie, Mark Auld and Craig Alexander - will be paid $30 million in cash and about 5.9 million new Dominion Finance shares issued at about $1.40 each for 100 per cent of the firm.

The deal, due for settlement on February 28, depending on due diligence and shareholder approval, will increase Dominion Finance's total assets by nearly 50 per cent.

"It's a company that we've admired from afar. They've been good operators," said Dominion Finance chief executive Terry Butler.

He said the company had strong management and good potential. It would continue to operate as a separate entity headed by current chief executive Eastgate.

Dominion Finance would continue to look around for more acquisitions. North South was the fifth finance firm Dominion had looked over, but it had discarded the previous four.

Butler believed rising interest rates and the prospect of an economic slowdown meant the finance company sector was now due for a period of consolidation.

McDouall Stuart Securities executive director Chris Stone agreed.

"What Dominion are doing is something you're going to see happen more often over the next little while. It's been a very, very good environment for finance companies.

"The good finance companies will continue to trade very, very profitably but there will be opportunities to consolidate. Scale is something that has benefits for companies like these."


The partners

* Fifty-year-old Dominion Finance specialises in business loans, management buy-out finance, commercial and residential property funding, agriculture, tourism, healthcare and business loans.

* North South, formed in 1999, lends money on property, mainly in the Auckland region.