Heartland New Zealand, which gained a banking licence just over a year ago, has agreed to buy a "home equity release" mortgage business for $NZ87 million ($A81.72 million) in cash and shares.
It plans to raise $NZ20 million of that from shareholders.
Home equity release (HER) products target the elderly, allowing them to draw against the equity in their home.
Similar products have been called reverse mortgages and deferred settlement schemes. Typically, the borrower doesn't pay interest and the mortgage is settled when they vacate.
Heartland has signed an agreement with Seniors Money International, majority-owned by Quadrant Private Equity, to buy its HER businesses in Australia and New Zealand.
The sale is conditional and would be settled on April 1.
The acquisition "provides Heartland with the product capability to meet the needs of the 65-plus demographic, which is a growing demographic and is typified by those with the majority of their personal wealth tied up in their primary residential dwelling," the bank said in a statement.
Under the deal, Heartland would acquire Sentinel New Zealand, the nation's biggest HER mortgage provider with about 4,050 loans, and Australian Seniors Finance, which has 20 per cent of that market and 4,250 loans.
The aggregate value is about $NZ760m including $NZ30.5m of HER loans bought by Heartland last December.
The acquisition will be funded with $NZ48.3m of cash, made up of the capital raising and existing cash on the balance sheet, and by the issue of $NZ38.7m of shares at 90 cents apiece.
The capital raising is by way of a $NZ15m placement and $NZ5m share purchase plan and the company said it has commitments from new and existing investors for the placement, which would be at 88 cents a share.
The shares last traded at 90 cents, up 1.1 per cent on the day, having been halted for the announcement.
