For Approved’s existing four owners, managing director Dave Shatford who bought out co-founder Karl Baker in April last year, the other co-founder Lawrence Diack, and directors Michael Beal and Nick McCorkindale, the deal is essentially a share swap as NZFH will pay them by issuing nearly 2.7 million new shares at a nominal 45 cents each.
They are already ahead on the deal. NZFH offered 5.5 million shares in an IPO last October at 30c and those shares are now trading at 50c.
"We were keen to give them some cash (but) they were very keen to take scrip," says NZFH managing director John Callaghan.
Approved will continue to operate as a stand-alone business quite separate from NZFH’s own mortgage broking operations.
"Our mortgage broking operation has generally specialised in the sub-prime market. We do a lot of non-conforming lending through Liberty and Bluestone," Callaghan says.
NZFH had been looking for a way of getting into the premium end of the market and that was what attracted it to Approved, he says.
He wants to keep the two brands separate to protect their respective places in the market. "You don’t got to Mercedes to buy a Toyota and you don’t got to Toyota to buy your Mercedes."
Approved has 11 franchisees and a total of 17 staff. Buying approved means NZFH’s combined mortgage broking operations are approaching writing $1 billion a year in home loans.
Shatford says the big advantage of being part of a larger group will be that Approved will be able to take bigger risks as it seeks to expand. "We’re looking at growth beyond Auckland and Wellington. That’s a big cost," Shatford says.
It also means that Approved can stick to its own knitting rather than exploring other niches such as the sub-prime market. He says Approved’s shareholders and NZFH have been talking about the deal, which is still subject to NZFH completing due diligence, since September.
