Kiwibank is making a last-minute push to buy TSB, urging Toi Foundation to consider their "superior" offer before signing off on a $620 million takeover by Heartland Bank.
David McLean, Chairman of Kiwibank’s holding company Kiwi Group Capital, has publicly doubled down on his desire to secure a deal. He confirmed the Crown-owned company wants to discuss a potential tie-up with TSB, pitching Kiwibank as the ideal partner.
"We have communicated our interest in TSB," McLean said. "We have a superior proposal ready for the trustees to consider and believe Kiwibank is the better partner."
McLean stressed that the final decision rests with the trustees. "Ultimately it is now a decision for the trustees to make, taking into consideration the community response and the support for the various options in front of them," he said.
This late intervention follows a High Court decision dismissing a Taranaki community group's legal bid to stall the Heartland sale.
Justice Andru Isac released a judgment on Monday throwing out an urgent injunction application from the Taranaki Community Accountability Society Incorporated. The group had accused the Toi Foundation of running a misleading public consultation process.
During the hearing, TCAS raised significant concerns about the structure of the proposed Heartland deal. They argued the public was misled by the $620 million price tag, pointing out that $50 million of that figure is a cash dividend coming directly from TSB's own capital reserves.
The society also warned that over half the purchase price relies on a vendor loan and subordinated debt from the Toi Foundation. Furthermore, they argued that exchanging 100% ownership of the local bank for a 17.5% minority stake in Heartland Group would strip the region of its control and expose the foundation to future share dilution.
Despite these arguments, Justice Isac labelled the society's claims "legally and factually weak". The judge ruled that the applicant lacked legal standing under the Trusts Act 2019, noting that charitable trusts do not have individual beneficiaries who can challenge trustee decisions in this manner.
Justice Isac found that Toi Foundation had met the consultation requirements outlined in its trust deed. He ruled that while many locals would prefer TSB to remain completely Taranaki-owned, the foundation had a rational basis to consider the financial trade-offs of continuing its current ownership structure.
His ruling clears the legal roadblock, leaving the Toi Foundation trustees free to vote tomorrow, Wednesday 26 August, on the Heartland proposal.
First announced in June, the deal would see the foundation sell all its TSB shares for $620 million. The foundation would then reinvest to hold a 17.5% stake in a newly merged entity called TSB Heartland Bank. The proposed transaction includes a $50 million pre-completion cash dividend, $250 million in Heartland shares, a $264 million vendor loan, and $56 million in subordinated debt.
Toi Foundation expects the proposed sale to boost the dividends available for local philanthropic projects in Taranaki. The foundation expects average annual returns to increase from $11 million to more than $34 million a year.
To progress with Heartland, the deal needs the backing of at least 75% of the foundation's trustees. If they approve it, Heartland shareholders will vote on September 30, with a target completion date in December pending regulatory approval.
