New financial institution to hold around $15 billion in New Zealand assets
Heartland Group Holdings Limited has signed a conditional merger agreement with Toi Foundation to combine Heartland Bank Limited and TSB Bank Limited into a single entity.
Under the proposed transaction, Heartland will acquire all TSB shares on issue from Toi Foundation for aggregate consideration of $620 million, according to a news release. The two banks will then merge to form TSB Heartland Bank Limited, which the company said would become New Zealand’s seventh-largest bank, with approximately $15 billion in New Zealand assets.
The $620 million consideration represents 76% of TSB’s book value and includes a pre-completion cash dividend from TSB of $50 million. The remaining consideration comprises $250 million in ordinary equity issued to Toi Foundation by Heartland, $56 million in subordinated debt, and a $264 million vendor loan provided by Toi Foundation to Heartland.
Toi Foundation will hold a 17.5% shareholding in Heartland upon completion of the transaction. Subject to Heartland shareholder approval, one Toi Foundation nominee is expected to be appointed initially to the Heartland board. Two existing TSB directors are also expected to join the TSB Heartland Bank board upon completion.
Banks aim to strengthen competition
Heartland chief executive officer Andrew Dixson said the merger would produce a more competitive banking alternative for New Zealanders.
“By merging Heartland Bank and TSB, we’ll be creating a larger New Zealand challenger bank,” Dixson said. “The bank’s regional focus will help to increase banking competition and choice for New Zealanders.”
Dixson said the combined institution would draw on both organisations’ histories.
“Heartland has a proud heritage dating back to Ashburton in 1875, supporting New Zealanders’ banking and finance needs for over 150 years,” he said. “Combining Heartland’s expertise with TSB’s 175-year legacy and customer-first reputation creates a bank with deep regional roots and the scale to support customers at every stage of their financial journey.”
The merged bank is expected to realise approximately $34 million per annum in pre-tax synergies once fully implemented through reduced duplication of activities, processes, and shared overheads. These synergies are expected to be realised progressively over a three-year period following completion. Total one-off integration costs of approximately $34 million are anticipated over the same period.
Transaction costs are estimated at approximately $15 million, with around $7 million expected to be reflected in Heartland’s net profit after tax for the financial year ending 30 June 2026 and approximately $8 million in the following financial year, subject to completion timing.
Taranaki will serve as a key operational hub for TSB Heartland Bank, with the company stating it intends to maintain a local branch network and customer-facing roles in the region. Toi Foundation, a perpetual philanthropic community trust that has owned TSB since 1988, said the sale would provide a more diversified investment portfolio to support its philanthropic activities across the Taranaki region.
The proposed merger is targeted for completion in December 2026, subject to conditions including community consultation with Taranaki residents, Heartland shareholder approval, and regulatory clearances in New Zealand and Australia. A shareholder meeting to vote on the transaction is scheduled for August 2026.
Heartland is being advised by Jarden as sole financial adviser, with Chapman Tripp advising on legal and tax matters, Deloitte providing financial and technology due diligence, and EY conducting an independent synergy assessment.
