After seeing a revenue uptick in FY22 as people casted around for loans and second-hand items, non-bank lending company Cash Converters (ASX: CVV) turned its attention to increasing its acquisitions to serve a greater customer base. In keeping with that, the Company is all set to acquire the Cash Converters New Zealand Master Franchisor for $15.5 million.
Currently, the Company already holds a 25% equity interest in all aspects of the New Zealand enterprise and will acquire the remaining 75% interest for a purchase price of over $15 million. The Company will be tapping into its available cash reserves to fund the purchase, with the transaction priced relative to net assets and earnings accretive. The acquisition is expected to complete in late 2022 as long as all the terms and conditions are satisfied.
Cash Converters Managing Director, Sam Budiselik, commented, “We continue to evaluate opportunities to invest our capital in a sensible way, to generate value for our shareholders. We are particularly excited to announce agreement on terms to acquire the remaining 75% of our New Zealand Master Franchisor, allowing us to fully integrate the Cash Converters brand, stores, and people in New Zealand into our wider corporate operation.”
Cash Converters are an Australian-based nonbank lending company that provides responsible cash solutions through its store and online networks. Customers can buy and sell second-hand goods, like laptops, toys or even household appliances through the Company. As per its report, on average, nearly 90% of Australian households have unwanted or unused items that are in sellable condition. This gives Cash Converters the opportunity to achieve its ESG goals as it purchases over 1.4 million second-hand items every year and sells them online, thus reducing overall waste. Still, its core competency is helping good borrowers with challenging credit profiles. It aims to support Australians who are often excluded by other lenders due to poor credit scores.
Cash Converters commenced franchised operations in New Zealand in 1993. Years later, in 2014, the Company acquired a 25% equity interest in the New Zealand enterprise. The Cash Converters New Zealand network comprises 22 stores, of which 11 are franchised and 11 are owned and operated by the Master Franchisor. As New Zealand is home to approximately 5.1 million people, with most of the population concentrated in 16 major urban areas, Cash Converters gains access to a larger customer base in need of its services.
Budiselik added, “I would like to take the opportunity to thank the New Zealand team for the investment made in our brand over nearly 30 years and the commitment shown to establishing a successful and profitable store network. Welcoming an experienced management team that will remain with the business now enables us to continue to build upon a strong and growing franchise in New Zealand, together with our franchise and corporate store colleagues.”
Besides this agreement, the Company is actively reviewing other potential domestic and international franchise acquisition targets. In a bid to boost its revenue, the Company wants to acquire companies based on valuation metrics. And that’s not all. In 2023, Cash Converters also aims to employ artificial intelligence to get new product insights.
Alinda is a Business Reporter for The Sentiment
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