SYDNEY, AUSTRALIA: Pepper Money Limited (ASX:PPM) has executed binding agreements to acquire a 65% interest in Stratton Finance Pty Limited (Stratton) for $78.0 million.
The acquisition is subject to Foreign Investment Review Board (FIRB) approval and other customary conditions precedent and is anticipated to complete in Q3 CY2022.
The transaction values Stratton at $120.0 million on a debt free / cash free basis, with the 65% interest acquired by Pepper Money for $78.0 million in cash (subject to customary adjustments), in part funded from a draw down on Pepper Money’s Corporate Debt Facility and in part from existing Pepper Money cash.
The parties have also entered into a Put and Call Option in relation to the remaining 35% stake in Stratton, exercisable from Q1 CY2024 through Q1 CY2026, with a base price of $42.0 million indexed based on Stratton’s
performance in the period between completion of the acquisition of the 65% interest and the acquisition of the remaining 35%.
The purchase price for the remaining 35% can be settled in cash or Pepper Money shares (or a combination of the two) at Pepper Money’s election.
Stratton Finance is one of Australia’s leading online direct-to-consumer asset finance broking platforms, with more than 23 years of operating experience, plus strong brand recognition built on trust and transparency.
Stratton is supported by a national network of offices (with its head office in Melbourne) and franchises, with a total headcount of 157 employees.
Stratton’s Net Amount Financed (NAF) for financial year ending 30 June 2021 (FY2021) was $697.9 million increasing from $544.2 million in FY2020 representing growth of 28% year on year.
Pepper Money’s CEO Mario Rehayem said: “We started our Asset Finance business at the end of CY2014 and have organically grown the business to $3.9 billion in AUM3, making us the leading non-bank asset finance lender in Australia.
It is a strong business that provides us with diversity of income and enhances our margins”.
“Our acquisition of the 65% stake in Stratton will enable us to accelerate the growth of the Asset Finance business, by providing opportunities to grow our direct-to-consumer offerings and leverage Stratton’s broad customer data to continue to develop innovative customer focused solutions”.
“Stratton is a business that is strongly aligned with Pepper Money’s core values and its purpose built technology already connects with Pepper Money’s Asset Finance Solana platform, positioning us to continue to drive strong business growth”.
“We remain committed to the Finance Broker market and are excited about this opportunity to work closely with Stratton on developing products and offerings to support a wider range of customers”.
Stratton Finance Chair, Rob Chaloner said. “Our relationship with Pepper Money has grown considerably over recent years with Pepper Money today being our largest funder of auto and leisure assets”.
“Our businesses share a similar culture with a strong focus on customer satisfaction. The acquisition announced today provides us with closer alignment with Pepper Money and its strong track record of product innovation which we will be able to integrate into our lending and technology capabilities to provide seamless customer experiences with enhanced choice and value”.
“We are excited about the vertical integration and growth opportunities that this partnership will bring.”
Pepper Money is one of Australia and New Zealand’s leading non-bank lenders. It was established in 2000 as a specialist
residential home loan lender in Australia with a focus on providing innovative home loan solutions to customers that
were being underserved by traditional lenders. Pepper Money today has a broad product offering of residential home
loans, asset finance commercial real estate and novated leases in Australia and residential home loans in New Zealand.