Heartland buys Wrightson Finance for $100m

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Heartland New Zealand, the lender built from the merger of Marac Finance and Canterbury and Southern Cross building societies, is expanding in rural lending with the $100 million bid for PGG Wrightson's finance unit.

Chief executive Jeff Greenslade told BusinessDesk the acquisition will lift Heartland's rural lending exposure to 21 per cent from 6 per cent-to-7 per cent currently.

He says there are opportunities in the sector, and Heartland ultimately wants about a third of its loan book in rural loans.

"What we're seeing out there is a shortage of credit available to farmers," Greenslade said.

"We want to be active in providing financial support for farmers - we're hearing there's the desire to go back to the old model where farmers have more than one financial provider."

The deal, which is subject to, regulatory, shareholder and debt-holder approvals, will see Heartland raise at least $55 million through a share purchase plan and two $10 million private placements from Wrightson and Pyne Gould Corp.

The placements will be at 75 cents a share, which is 15 per cent below the firm's net tangible asset value, but a 4.2 per cent premium to the current share price of 72 cents.

No price has been flagged for the share purchase plan.

Craigs Investment Partners will lead manage the offer, which is expected to be completed by the end of August.

Heartland will acquire Wrightson loans worth $400 million to $430 million, lifting the value of its loan book by about a fifth to $2.6 billion, and will take on the rural service company's $92 million of listed bonds and $260 million of debentures.

The lender expects to make a net profit of between $6 million and $8 million in the 12 months ended June 30, and flagged 2012 earnings of between $20 million and $24 million, including the Wrightson acquisition.

Greenslade said once the latest purchase goes through, Heartland will focus on organic growth as the economy picks up and demand for new credit returns.

Wrightson will carve out some $96.5 million of loans into a special purpose vehicle to refinance or realise those assets in the short- to medium-term, and will provide a $30 million guarantee on certain loans sold to Heartland.

According to Wrightson's first-half results, impaired and past due loans amounted to $111.6 million.

Wrightson chairman John Anderson said in a statement the sale is supported by new major shareholder, Agria Singapore, and is "consistent with our ongoing strategy to reduce debt in the parent company, grow our AgriTech and AgriServices operations and seek to introduce a dividend payment policy for shareholders in the medium-term."

The sale comes two weeks after Wrightson sold its half share of New Zealand Merino Co. to its partners for $7.6 million. Agria and China's New Hope Group completed their $144 million bid to take a controlling stake in Wrightson last month.

Wrightson shareholders will vote on the sale of the finance unit at the June 28 special meeting, when they will also be asked to approve Ngai Tahu's investment in the Agria vehicle.

The rural services company's shares last traded at 52 cents.