Heartland shareholders approved a deal where the bank buys all the TSB shares held by the Toi Foundation and then merge the two entities into one bank.

Shareholders representing 58.09% of Heartland’s issued capital voted on the Proposed Transaction, with 94.80% of the votes cast in favour.

Shareholder William Cairns, the last shareholder to speak, said it is “a great deal for shareholders …. Well done, and I totally support what you’re doing.”

Heartland is paying a nominal $620 million for the Taranaki-based bank, although none of that will be in cash, and payment is a mix of new shares that will make TSB’s owner, the Toi Foundation, a 17.5% shareholder in Heartland, vendor loans and subordinated debt held by Toi.

Heartland chair Greg Tomlinson told the special meeting that the deal will create an enlarged New Zealand bank with about $15 billion in assets and that the combined entity “can do more together than either could do alone.”

Heartland also owns an Australian bank.

Heartland chief executive Andrew Dixson told shareholders the deal will increase the NZ asset base by about 171% and that the increased scale will support technology, risk management and regulatory compliance costs, “which disproportionately affects smaller subscale banks.”

Dixson said the synergies of about $34 million will be fully realised over three years but that the deal would be immediately accretive to per-share earnings and dividends.

“Yesterday’s approval is a strong endorsement from our shareholders of the strategic rationale for this transaction and the long-term value it is expected to create. It marks an important milestone towards bringing together two complementary banks to create a larger, more competitive New Zealand bank, with greater capacity to invest in future growth," Dixson said in a statement to NZX today.

Independent expert Calibre Partners noted the price Heartland will pay for TSB represents about 0.76 times its book value and that the benefits would outweight the negatives.

When a shareholder asked what those negatives are, Tomlinson said “there haven’t really been any negatives, to be frank.”

Toi approved the transaction on Aug 27 but the deal still requires Reserve Bank approval.