Kiwibank's parent seeks TSB talks while Heartland's $620 million merger advances
Kiwibank's parent has opened the door to a rival approach for TSB Bank just months before Heartland Group's $620 million merger is due to close.
Kiwi Group Capital chairman David McLean has said the Kiwibank parent wants to discuss a "potential tie-up" with TSB owner Toi Foundation. He said the group believed in building a stronger New Zealand-owned banking alternative and wanted to explore what it could do together with Toi Foundation.
McLean added that any such engagement would be at Toi Foundation's discretion and would follow the outcome of the current process between TSB and Heartland.
Heartland holds its line
Heartland chief executive Andrew Dixson told interest.co.nz he was not surprised TSB had attracted interest from other parties.
"I mean, TSB is a great bank, so I'm not surprised there's interest, though I'm not clear what is meant by a tie-up," he said.
Dixson said questions about other potential bidders were for Toi Foundation to answer, and he declined to say whether Heartland would walk away from the deal if the process became complicated. He confirmed December 1 remains the target completion date for the merger, which would combine Heartland Bank and TSB Bank into a new entity, TSB Heartland Bank.
The agreement, signed June 1, includes a $50 million pre-completion cash dividend from TSB, and Toi Foundation would hold a 17.5% shareholding in Heartland Group once the deal completes.
Trouble in Taranaki
The merger also faces a legal challenge from the Taranaki Community Accountability Society, which sought an interim High Court injunction to stop Toi Foundation trustees from voting on the sale.
Counsel for the society told the court the published merger information was "misleading" and "one-sided," a claim Toi Foundation counsel Justin Smith KC rejected. Justice Andru Isac reserved his decision, expected early next week.
Dixson said Taranaki would remain a hub for customer-based banking services after the merger, with the local branch network and customer-facing roles retained.
A consultation do-over
Toi Foundation had to reopen public consultation in July after it miscalculated the submission timeframe by one day. The trust received 1203 submissions in the first round, and the new consultation period closed July 14.
Trustees must vote before the end of August, and at least eight of the ten trustees need to approve the sale.
Toi Foundation chairman Chris Ussher has said the trust's average annual dividend from TSB has been around $10 million over the past five to ten years, and the Heartland transaction is expected to lift total annual income by around $20 million.
Heartland's FY2026 results, released the same day as the injunction hearing, showed net profit after tax of $93.2 million, up from $38.8 million the previous year. Underlying NPAT rose to $90.4 million from $46.9 million, net interest margin rose 36 basis points to 3.98%, and underlying return on equity rose 286 basis points to 7.1%.
A special shareholder meeting to vote on the transaction is set for September 30. If approved, the combined bank would hold approximately $15 billion in New Zealand assets, with an estimated $34 million in annual pre-tax cost synergies once realised.
