One of Australia’s leading non-bank lenders Latitude Group (ASX: LFS), has today executed binding agreements to acquire Humm’s (ASX: HUM) consumer finance business for $35 million cash and 150 million Latitude shares equating to full consideration of $335 million.
As previously reported by Business News Australia in early January, the deal brings Humm’s buy now, pay later, instalments and credit cards operations under the ownership of the Melbourne-based consumer finance giant Latitude, subject to regulatory and shareholder approvals after Humm’s board recommended the deal.
Humm’s consumer business is an established and reputable brand in New Zealand and Australia with over 2.6 million customers, 60,000 merchants relationships and net receivables worth $1.8 billion.
“The acquisition of Humm’s consumer business is a great outcome for both Latitude and Humm shareholders,” Latitude’s managing director and CEO Ahmed Fahour said.
“The transaction will deliver significant synergies and shareholder value, cementing our position as the leading instalments and consumer lending business in Australia and New Zealand and accelerate our international expansion.
“Humm’s consumer business is a great fit for Latitude given Humm’s capability in big and small ticket BNPL and its merchant base, providing additional scale to Latitude at minimal marginal cost.”
The acquisition adds significant additional scale to Latitude’s business, consolidating its position as one of Australia and New Zealand’s leading non-bank consumer lender. By complimenting technology and product strategy, the company hopes to reduce five receivable platforms into two.
Post-acquisition, the business will have more than $8 billion of gross receivables, $9.5 billion of transaction volume and more than five million customers.
Latitude aims for full integration by the end of 2023 and expects to generate $55 million of annual synergies from duplicate costs, technology rationalisation and funding benefits.
Combined with an expected $35 million Humm consumer pre-tax cash earnings for 2023, Latitude anticipates $90 million of pre-tax cash earnings for the full year 2023 - excluding $10 million of revenue synergies.
Humm will retain ownership of its commercial business, flexicommercial, and remain a standalone ASX-listed entity. On completing the deal, Humm Consumer will have net tangible assets of $190 million.
“This is a transformational transaction for Humm group,” Humm Chairman Christine Christian AO said.
“The combination of Humm Consumer and Latitude will create a leading pure-play consumer finance business, a significant and profitable company able to compete at scale and build on Humm Consumer’s track record of building award-winning products and experiences that customers love.
“This will create an even more compelling proposition for merchants, retailers and customers. The combined business will create significant value, both for Humm shareholders who receive Latitude shares and existing Latitude investors, and we look forward to working with Latitude to complete the transaction.”
HUM intends to distribute the entire HCF consideration of 150 million Latitude shares and $35million in cash to shareholders, which means they will receive approximately $0.68 per share, consisting of 0.30 Latitude shares and $0.07 cash.
Upon completion of the deal, Humm Group CEO Rebecca James will be invited by Latitude to lead the combined group’s BNPL business, and Latitude intends to invite two Humm independent directors to join the Latitude board.
Following the announcement, early morning trading found shares in Latitude Group (ASX: LFS) up 0.25 per cent, while Humm’s (ASX: HUM) share price climbed 3.49 per cent as of 12.15 pm AEDT.
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