... and now the binding agreement... they can talk it up but this Board and Mgmt have overseen a huge erosion of shareholder funds amidst the crazy hype of BNPL. They were always over-reaching strategically and financially... and so we get to the inevitable end. One of these days just a simple apology would be nice. Disc: no longer held

Entry into binding, definitive agreement to sell hummgroup consumer finance (HCF) to Latitude Group for aggregate consideration of $335 million1

o hummgroup intends to distribute and transfer the entire HCF consideration of 150 million Latitude shares and $35 million cash to shareholders

o Combination of HCF with Latitude will create a leading and profitable pure-play consumer finance business

o Sale and distribution of proceeds subject to hummgroup shareholder and regulatory approvals

hummgroup will continue to fully own hummgroup’s strongly performing Commercial business, flexicommercial, which will remain an ASX-listed company with a strong balance sheet to fund its continued growth

The consideration for HCF comprises 150 million Latitude shares and $35 million cash. The aggregate value of $335 million represents a multiple of 13.4x HCF run rate Cash NPAT and 1.8x HCF net tangible assets. HUM intends to distribute the sale proceeds to shareholders, who will receive approximately $0.68 per share, consisting of 0.30 Latitude shares and $0.07 cash.

HUM will retain full ownership of the flexicommercial business, and will continue as an appropriately capitalised ASX-listed company owned by HUM’s existing shareholders. The Board of HUM believes the Commercial business has significant organic and strategic growth potential, with a 1H22 expected (unaudited) CNPAT of $15.3 million in the Commercial and Leasing segment.

Humm getting close to a deal with Latitude to purchase the Consumer (BNPL and credit card) business which would leave a stand alone Commercial financing business. Great example of hype exceeding strategy and execution and destroying shareholder value along the way.

Proposal from Latitude for Humm Consumer Finance

• HUM has entered into a non-binding heads of agreement with Latitude for the sale of Humm Consumer Finance for approximately $335 million
• Exclusivity (subject to a customary fiduciary carve-out) has been agreed through to 31 January 2022 to facilitate reciprocal due diligence and negotiation of a definitive agreement
• Execution of any binding agreement will be subject to satisfactory due diligence, acceptable documentation, and Board approvals
• Completion of any transaction is anticipated to be conditional upon ATO review, regulatory approvals, and HUM shareholder approvals
• There is no assurance that any binding agreement will be reached or that a transaction will occur

Humm Group Limited (ASX: HUM) announces that it has received a proposal from Latitude Group Holdings Limited (ASX: LFS; Latitude) for the purchase of its BNPL, instalment, and credit card operations, Humm Consumer Finance (HCF), and has entered into a non-binding heads of agreement to facilitate reciprocal due diligence and negotiation of a definitive agreement.

Latitude has proposed consideration of 150 million Latitude shares (worth $300m based on a $2.00 Latitude share price) and $35 million cash for HCF, which equates to $335 million in aggregate. HCF would be combined with Latitude’s existing BNPL and instalments businesses, and HUM shareholders would fully retain the Commercial business.

HUM Chairman Christine Christian said: “HUM’s Board and Management are committed to maximising shareholder value. In this context, we believe that the Latitude proposal is potentially attractive to HUM shareholders and warrants due diligence and detailed negotiation.”

Latitude’s proposal for HCF equates to approximately $0.68 per HUM share based on a $2.00 Latitude share price.

Further to my closing random thoughts in the straw below, Hum has just announced that the Chair (Andrew Abercrombie - Liberal Party heavyweight, early super-spreader of Covid in Melbourne and... founder of Flexigroup) has stepped down (more likely been rolled by the Board for stagnant share performance and effectively that they are on the block and up for sale.

Might be a nice acquisition for someone like ZIP?

Shares trading right now up 21% on the announcement.

DISC: held in SMSF

20 December 2021

Humm Group Limited announces change of Chair and receipt of proposals

Humm Group Limited (ASX: HUM) today announces that Andrew Abercrombie has stepped down as Chair of the company, with Christine Christian AO being appointed as independent Chair.

The company also advises that it has received approaches from third parties to acquire all or part of Humm Group. The company intends to engage in relation to these proposals, to determine whether they are capable of becoming definitive offers that are in the best interests of the company and its shareholders. There is no assurance that any transaction will occur.

The Board considers that the business is performing in line with expectations and that it has significant potential, both in Australia and overseas. The group remains strongly profitable and has no corporate debt. However, the Board considers that the Company’s shares are undervalued by recent trading prices on the ASX and the Board is keen to maximise value for all shareholders.

Independent Chair, Christine Christian said:

“On behalf of my fellow directors I thank Andrew for his service and his counsel as Chairman of the Group. Andrew was a founding shareholder of the original FlexiRent business some 20 years ago now and the Board continues to benefit from his insights and corporate knowledge. I look forward to working with my fellow directors to assess the proposals put before us and importantly, to support the management team as they implement the company’s strategy to grow the business profitably.”

hummgroup shareholders do not need to take any action in response to this announcement.

The Company has appointed Flagstaff Partners as financial adviser and Minter Ellison as legal adviser.

I guess mostly reprising my short straw from a couple of weeks ago and following on from @NewbieHK and @thunderhead.  Management have, I agree, done a really solid job - just look at the turnaround in the Commercial business.  Rebecca James appears to have a gift with the branding, marketing, communications side of the business. She's compelling every time I see her speak.

The issue in BNPL though is growth and scale and maybe its my small brain and lack of visionary spirit but I just cant see a strategic pathway from where they are to scale growth in UK/Europe and North America given the competitive set they are on the field with - Apple, PayPal, Square/APT... CBA...

There has to be I think serious consolidation in the sector... perhaps the chairman sees a few offers coming his way?

I'm less worried about the debt which they seem to have a grip on than the stretch into BNPL and how that's going.  Humm seem to be another caught in the middle - a little late to the BNPL party, weighed down by legacy structure and systems internally and not able to get the growth that the BNPL hype demands.  At the same time, their commercial lending business seems to be going well.

I just can't see a path to them carving out a competitive niche when the likes of Square/APT, CBA, PayPal, Apple etc are coming after them.  They've built some good products no doubt but surely they are an acquisition in waiting?  Can't imagine they won't have to raise capital if they properly start to execute on their UK & Canada strategy.

Disc: small holding in my SMSF (waiting for an acquisition premium)