Heartland Group Holdings has reached a conditional agreement to buy an Australian stock financing business for A$143 million ($154.4m) plus a potential top-up of A$11m if the new business meets certain performance metrics.
The NZX-listed company which also owns Heartland Bank and a transtasman reverse mortgage business, said it had signed documentation to acquire StockCo Holdings 2 Pty from its shareholders StockCo Australia Holdings (70 per cent shareholder) and Elders Rural Service Australia (30 per cent).
The deal also includes Heartland acquiring all the shares in StockCo Australian Management Pty which together with StockCo Holdings 2 Pty make up a business called StockCo Australia.
StockCo Australia specialises in livestock finance for cattle and sheep farmers in Australia and has total assets of A$341m in a market estimated to be worth A$7 billion.
In a statement, Heartland said the acquisition would extend its “best or only” strategy in Australia adding to its existing A$1.2 billion Australian reverse mortgage business.
The transaction is expected to add A$10-$12m in net profit to Heartland’s bottom line on an annual basis before the cost of debt funding needed for the acquisition was taken into account.
Heartland Group made $87m in its 2020 financial year.
The acquisition is subject to Heartland getting a new operational funding facility as well as other conditions it did not name.
“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.”
The deal also includes Elders continuing as a distribution partner for the finance products to its clients for an initial five-year term.
The deal is expected to be completed by the end of May.
Heartland said given the timing of the acquisition there would be no change to its market guidance for its June 30 financial year.
Heartland’s shares were up 4c to $2.29 on the announcement and are up more than 28 per cent over the last year.