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On Thursday (6 January), ASX-listed Humm Group confirmed it had received a proposal from non-bank lender Latitude Group for the purchase of its buy now, pay later (BNPL), instalment and credit card segment, Humm Consumer Finance.
Latitude has offered around 150 million shares in its company (worth $300 million, based on a $2 share price) and $35 million cash in exchange, equating to a total value of $335 million.
If successful, Latitude would combine the consumer finance business with its existing BNPL and instalment division, while Humm would retain its commercial lending arm.
It would follow Latitude’s acquisition of personal lending fintech Symple Loans last year, which it bought for $200 million.
The company has also proposed that Humm Group chief executive Rebecca James lead the combined BNPL business, reporting to Latitude managing director and group CEO Ahmed Fahour.
Further, Latitude has outlined intentions to invite two Humm directors to join its group board.
The lender believes the acquisition would cement its position as an instalments and consumer lender in Australia and New Zealand, eyeing Humm’s big and small-ticket BNPL transactions. Mr Fahour noted “highly deliverable synergies”, while the company pointed to the gaining of scale at minimal cost.
As at 30 June 2021, Humm’s consumer business had around $1.8 billion in net receivables. The deal would create a combined Latitude Group with more than $8 billion in receivables, over 5 million customers and 70,000-odd merchants.
“The proposed transaction would enable us to accelerate the deployment of BNPL and instalment solutions for our customers and merchant partners in Australia/New Zealand and accelerate our growth in our international markets,” Mr Fahour commented.
As part of its evaluation of the offer, Humm has begun reviewing structure and execution mechanics – but the completion of any transaction is expected to be conditional to Australian Taxation Office (ATO) review, regulatory approvals and shareholder approvals.
Reflecting on the potential to become a “pure play” commercial business, Humm noted its recent efforts to target brokers for its SME lending arm, FlexiCommercial.
The moves reportedly led to the commercial business doubling its volumes for the first quarter of 2022 financial year, compared to the previous corresponding period.
“As a standalone ASX-listed commercial business, [Humm’s] market position across Australia and New Zealand would be underpinned by robust standalone operational and technology platforms and an appropriate capital base,” the company stated.
“[Humm’s] board and management believe the commercial business has significant organic and strategic growth potential.”
Latitude and Humm have entered into a non-binding heads of agreement, with the pair to complete due diligence and negotiations for a definitive deal.
Any binding agreement will be subject to due diligence, documentation and board approval, from both companies.
Christine Christian, chair of Humm, added shareholder value will remain her board’s priority when assessing the deal.
“In this context, we believe that the Latitude proposal is potentially attractive to [Humm] shareholders and warrants due diligence and detailed negotiation,” she said.
But, the market could face tougher regulations in the near future, as the government has flagged that it will review and consider reforms for the payments regulation system for the first time in 25 years.
[Related: New PFM app granted open banking access]