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Heartland acquires specialist lender

Reverse mortgage provider Heartland Group has moved to purchase agri lender StockCo Australia, in a bid to broaden its Australian offering.

Heartland has signed conditional sale documents for the acquisition of StockCo Holdings 2 Pty Ltd from its current owners StockCo Australia (which owns 70 per cent) and Elders Rural Service Australia (which holds the remaining 30 per cent).

The reverse mortgage vendor will also buy 100 per cent of the shares in StockCo Australia Management, which together with StockCo Holdings 2 Pty Ltd, forms StockCo Australia.

StockCo Australia is a livestock finance specialist, with 60 per cent of its $341 million portfolio being cattle farmers and around 35 per cent being sheep.

Heartland stated the deal will extend its “Australia offering in an area where it already has expertise”.

The company offers various rural loan options in New Zealand, including online finance for sheep and cattle farmers and livestock finance similar to StockCo Australia.

In Australia, the new livestock finance business will add to Heartland’s local $1.2 billion reverse mortgage arm.

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The transaction is forecast to contribute $10 million to $12 million in additional annual net profit. But, given the timing of the acquisition and the transaction costs, Heartland has not changed its market guidance for the current financial year.

The deal, which is expected to complete by the end of May, has a total cost of $143 million, plus a potential top-up of $11 million, depending on whether specific performance metrics are achieved.

Heartland has flagged that it will fund the acquisition in the short term through new debt facilities provided by a “major Australasian financial institution”.

Under the deal, Elders will divest its 30 per cent stake in StockCo, but it will continue as a distribution partner.

When the sale is complete, Elders will enter a new exclusive distribution agreement, where it will continue to distribute StockCo products to its clients.

The agreement has an initial term of five years.

However, the StockCo acquisition remains subject to a new operational funding facility being executed and other conditions.

In February, Heartland reported a rise in lending in the first half of the 2022 financial year, but the company predicted that tightening credit regulations will shape lending volumes for the remainder of the year.

Mortgage Business sister brand The Adviser covered off on agricultural finance and the key trends and challenges facing borrowers in its March regional finance edition. Read it here.

[Related: Treasury green-lights NAB, Citi deal]

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