A hearing seeking an urgent injunction to block the proposed amalgamation of TSB and Heartland Group has concluded, with Justice Andru Isac reserving his decision.
It's expected that a judgment from Justice Isac, who presided over the hearing at the High Court in Wellington, will be released early next week.
Heartland Group Holdings announced in June that it had signed a deal with the Toi Foundation, TSB’s owner, to buy all TSB shares from Toi in a deal valued at $620 million.
The Toi Foundation, a charitable trust, opened consultation on the proposed TSB and Heartland amalgamation. In July, the foundation reopened its consultation after there was an incorrect calculation when it came to the timeframe of the initial public consultation by one day.
Toi Foundation trustees are expected to vote on the proposal before the end of August.
The application for the urgent injunction hearing was lodged on behalf of a group called the Taranaki Community Accountability Society (TCAS).
The group describes itself as an advocate for the Taranaki community and on social media, encouraged followers to "defend" their local bank.
'Once it's gone, it's gone'
During the hearing, counsel for TCAS, Daniel Grove, delved into the nature of the transaction and the consultation process.
He said the Taranaki community did not have “adequate information” given to them to make intelligent and useful responses, calling the published information from the foundation “misleading”, “one-sided” and “inaccurate.”
“Our criticisms and expert criticisms are not responded to and need to be looked at further."
He said the Taranaki community were beneficiaries and "this is a special trust ... This is something for the community."
"This is public litigation for the Taranaki community, pursued by a society who just wants an open, proper process here," he said.
TSB was a community bank, he said. “It is old school. Once it’s gone, it’s gone.”
No 'tidal wave of community opposition'
But counsel for Toi Foundation, Justin Smith KC, said the suggestion that information provided to the public was “one-sided” was not correct.
“The intention that it was a one-sided presentation does not have any real foundation.”
And when the consultation period re-opened, Smith said the consultation actually became longer.
With the Toi Foundation being a charitable trust, Smith said there were no beneficiaries and only beneficiaries could seek a review.
He said community opposition was not a relevant factor for the purpose of the trustees and there had not been a “tidal wave of community opposition.”
“The trustees are within their powers to sell the bank,” Smith said, and proceeds didn’t have to be invested locally or domestically.
Not about stopping the trustees from voting at some stage
Grove said if there hasn't been proper consultation, there can't be a vote.
The purpose of this injunction hearing, he said, was not about stopping the trustees from voting at some stage.
He said at this stage, there was a conditional sale and there would be no financial loss if it didn't proceed because it was conditional.
At the end of the day-long hearing, Justice Isac said he would reserve his decision.
‘New Zealand challenger bank of scale with a regional focus’
Through the proposed merger, Heartland wants to establish “a New Zealand challenger bank of scale with a regional focus” which will be called TSB Heartland Bank.
If the deal goes ahead, one Toi Foundation nominee would be appointed to the Heartland Group board and two existing TSB directors would join the TSB Heartland Bank board. Toi Foundation would hold a 17.5% shareholding in Heartland Group. TSB and Heartland Bank would merge and be renamed TSB Heartland Bank.
On Thursday, Heartland said subject to satisfaction of the Toi Foundation trustee approval condition, Heartland now expects to submit its regulatory application to the Reserve Bank, and to dispatch its notice of special meeting shareholders at the end of August.
‘Exploring what we could do together’
Heartland Group isn’t the only one with an eye on TSB.
David McLean, chairman of Kiwibank’s parent company Kiwi Group Capital, said: "We believe in building a stronger New Zealand-owned banking alternative for the good of New Zealanders and we consider opportunities that support that.”
“We would have interest in engaging with Toi Foundation and exploring what we could do together but that would be at their discretion and following the outcome of the current process between TSB and Heartland," McLean said.
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