ACCC puts $120m mortgage aggregator acquisition in doubt

ACCC puts $120m mortgage aggregator acquisition in doubt

Australia's competition watchdog has raised concerns over a proposed $120 merger that would bring two in every five mortgage brokers in the country under the one banner.

In August Australian Finance Group (ASX: AFG) entered into a binding conditional implementation deed to merge with mortgage aggregator Connective Group, through a mixed offering of $60 million in cash and almost 31,000 shares.

AFG shares have since risen since the agreement was made, meaning the deal is now worth more like $143 million to Connective. 

With a network of more than 3,600 brokers across five states and a panel of more than 50 lenders, Connective would lift the merged group's broker numbers to 6,575 nationwide with combined mortgage settlements of $76 billion in FY19.

That is, unless the Australian Competition and Consumer Commission (ACCC) thinks otherwise.

For now the regulator has flagged preliminary concerns about the deal between the two intermediaries that connect lenders with their affiliated brokers.

"Combining AFG and Connective would create the largest mortgage aggregator in Australia by a significant margin, accounting for almost 40 per cent of all mortgage brokers operating in Australia," says ACCC Chair Rod Sims.

The ACCC notes more than half of all home loans written each year are initiated through the broker channel, and brokers play an important role for consumers when seeking a home loan and for lenders in reaching those consumers.

"AFG and Connective operate in an already concentrated market, and not many other mortgage aggregators offer a similar level or type of service," says Sims.

"Additionally, potential entrants or small players may be deterred from expanding by various barriers, including compliance costs.

"The ACCC is concerned there will be limited similar alternatives for brokers to switch to. This may negatively impact the services offered to brokers."

Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.

Business News Australia

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

Advertisement

Related Stories

Why supporting men's mental health leads to stronger businesses

Why supporting men's mental health leads to stronger businesses

When I stop posting 20 Instagram stories a day, my friends know s...

Vital Signs: Why has growth slowed globally? It has something to do with technology

Vital Signs: Why has growth slowed globally? It has something to do with technology

Even before COVID-19 hit, Australia was experiencing slow growth...

Premier puts Sydney's eastern suburbs on "very high alert" with new mask guidance

Premier puts Sydney's eastern suburbs on "very high alert" with new mask guidance

Update (1:32pm AEST): In response to the unfolding situation in e...

Bubs pouring into the US market with Walmart and Amazon partnerships

Bubs pouring into the US market with Walmart and Amazon partnerships

Bubs (ASX: BUB) is poised to scoop up a share of the $5.1 billion...