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Speirs Finance will be added to Allied's growing finance operation, Allied Nationwide Finance. Speirs Finance has total loan receivables of about $230 million.
The combined company will have about $400 million in assets.
The purchase will be paid for by way of the issue of $2.5 million worth of new Allied Farmers at an issue price of $1.35 and $3.1 million of cash - $2 million of which will be reinvested by Speirs Group back into new Allied Nationwide Finance perpetual bonds.
The transaction comes amid a backgroup of a wave of finance company failures. About 25 have either failed or got into trouble in the past two years as the property market slumps and "mum and dad" investors seek to withdraw money from the finance company sector.
Allied Farmers said the deal was expected to occur on or before September 30. Conditions of the deal included gaining required approvals from Speirs Group shareholders and debt obligation holders.
The Allied Nationwide bonds would be perpetual and carry an initial annual interest rate of 13.16 per cent, payable quarterly. Speirs Group had a put option to call on Allied Farmers to redeem the bonds in five years time at face value.
Speirs Group said it had been considering the sale of the Speirs Finance business to give it more scale in a consolidating market. Speirs Finance had continued to perform well despite challenges presented by the global credit market and the flow-on impact of this on the New Zealand market and for finance companies generally.
But it had become increasingly apparent in recent months, given the current environment and upcoming government regulation for finance companies, that the future of Speirs Finance was enhanced by being part of a larger finance business with a broader portfolio of activities and enhanced funding opportunities.
"The board has decided this course of action will provide a better outcome for the company as a whole than an alternative of seeking to acquire other finance companies to build scale to compete effectively in the changing borrowing and lending markets," Speirs Group said.
Speirs Group expected to remain listed on the NZX alternative exchange, primarily with investments in Speirs Nutritionals and Speirs Foods, along with the shares in Allied Farmers and the bonds in Allied Nationwide.
- with NZPA