Heartland New Zealand is buying the New Zealand and Australian home equity release mortgage businesses of Seniors Money International for $87 million.
The bank plans to raise $20 million to part-fund the purchase, $15 million from a placement to professional investors and $5 million from a share purchase plan for retail shareholders.
Radio New Zealand's business editor said the purchase will boost Heartland's assets by about 25 percent.
Heartland said the purchase allows it to target the over 65s, the majority of whom have most of their personal wealth tied up in their homes.
Heartland said the purchase fits with its strategy of pursuing niches within the household, business and rural sectors where it can obtain a market-leading position.
Currently, Heartland has a very small mortgage portfolio, and it doesn't attempt to compete against the major banks in this area.
The bank said the Australian business will be a standalone operation, while the New Zealand arm will be gradually integrated into Heartland.
It also expects a first-half profit of about $16.5 million and an annual profit of between $34 - $37 million.
While it's still finalising its 2015 forecast, Heartland said taking into account the expected contribution from the purchase, the likely result should be between $42 - $44 million.
