SYDNEY, AUSTRALIA: Humm Group Limited (ASX: HUM) has entered into a binding agreement to sell HUM Consumer Finance (HCF) comprising its buy now pay later (BNPL), instalment and credit card operations, to Latitude Group Holdings Limited (ASX: LFS).

The consideration for HUM Consumer Finance (HCF) comprises 150 million Latitude shares and $35 million cash translating into aggregate value of $335 million.

HUM Chairman Christine Christian AO said: “This is a transformational transaction for humm group that represents compelling value for shareholders.

It is proposed that HUM shareholders will receive the consideration for the sale of HCF, comprising shares in Latitude – which will provide HUM shareholders with the opportunity to participate in the growth benefits and synergies arising from the combination – and cash.

HUM will continue to fully own HUM’s strongly performing commercial business, flexicommercial, which will continue as a pure play ASX-listed company owned by its existing shareholders. HUM will have the capital and liquidity to support its continued growth as a leading non-bank provider of asset finance in Australia and New Zealand.

This is an attractive outcome for HUM shareholders.”

HUM intends to distribute the sale proceeds5 to shareholders, who will receive approximately $0.68 per share, consisting of 0.30 Latitude shares and $0.07 cash. A scheme of arrangement between HUM and its shareholders will be entered into to facilitate the distribution6 of the Latitude Shares.

By receiving a distribution of the Latitude shares which HUM will receive as part consideration for the sale of HCF, HUM shareholders could further benefit from any potential enhanced scale and efficiencies of Latitude’s enlarged consumer finance platform. Latitude has indicated it expects significant synergies to arise from the combination.

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.

After completing the sale of HCF and distributing the share and cash consideration to shareholders, HUM expects that it will have unrestricted cash, which will be first applied to the retirement of its perpetual note (c. $55 million).

Thereafter, the HUM Board will take a disciplined approach in allocating the remaining unrestricted cash between investing further in the accelerated growth of the Commercial business and capital management initiatives.

The Board of HUM recommends that shareholders vote in favour of the Latitude transaction, and associated resolutions, including the proposed scheme of arrangement, in the absence of a superior proposal and subject to an independent expert concluding that the Latitude transaction is in the best interests of shareholders.

In addition to HUM shareholder approval for the sale of HCF via an ordinary resolution, the implementation of the sale transaction is subject to customary terms and conditions as well as approval by various regulatory bodies, including the Australian Foreign Investment Review Board and New Zealand Overseas Investment Office.

The proposed scheme of arrangement to facilitate the distribution of Latitude shares requires the approval of HUM shareholders and the Court. HUM intends to distribute the sale proceeds in a tax efficient manner and has sought a ruling from the Australian Taxation Office, which HUM expects will be issued after completion of the Latitude transaction.

The HUM Board considers the price offered by Latitude for HCF to be attractive and by receiving Latitude shares as consideration HUM shareholders could further benefit from any potential enhanced scale and efficiencies, including synergies, of the enlarged consumer finance business.