In a remarkable series of events headed by one rogue Director, the proposed $335 million sale of Humm’s (ASX: HUM) buy-now-pay-later division to Latitude (ASX: LFS) has been shot down just two days after the Chair of Humm pleaded with shareholders to accept the acquisition proposal.
What makes the saga most incredible is the global implosion of BNPL services since the acquisition was first proposed by Latitude in February 2022, just as the sector was collapsing amid rising customer delinquencies where no operator was immune.
Subsequently, just two days ago, Humm Chair Christine Christian took the remarkable steps to issue a statement via the ASX to all shareholders, emphasising the horrific performance of Humm’s consumer finance (HCF) division ahead of next week’s shareholder vote.
“Fact: Humm’s BNPL business is not profitable and HCF is not growing. As a standalone, sub-scale business, the Majority Directors believe that HCF faces significant macro and structural headwinds, and the entire BNPL sector is under pressure,” said the Humm statement.
Notably, the statement was only “Authorised for release by the Majority Directors of hummgroup.”
The statement is unlikely to have garnered the approval of Director and original Founder, Andrew Abercrombie who has been the sole Director that has opposed the sales in recent weeks, campaigning for Latitude to increase their Offer to include more cash, rather than LFS shares.
As part of his campaigning, Abercrombie has been buying up HUM shares to further push his point that the Latitude undervalues HCF and that he would use his large holdings to vote against the sale in its current form.
These on-market purchases were disclosed to the ASX as $2.1m on June 6, $5.1m on June 8, $1.3m on June 10, $1.7m on June 15 and $1.2m on June 16.
In total, Abercrombie has spent $11.3 million to increase his stake in Humm over the course of a week, increasing his stake in the Company to almost 23%. Based on how the deal is structured as a trade sale, it only requires 50% approval from shareholders to proceed.
Despite these on-market purchases, the backing of Abercrombie has done little to save the decline in HUM shares amid a wider global sell off where HUM shares have fallen 29% from $0.80 to last close at $0.575.
With news of the sale being called off by mutual agreement, shares in HUM have continued to slide down to $0.485 in early morning trade. This was to be expected given Christian had said on multiple occasions that had it not been for the pending sale of HCF to Latitude, HUM shares would have fallen significantly while the sale was awaiting shareholder approval.
As part of Australia’s corporate activity regulation, such an acquisition required an Independent Expert Report of the HCF business, for which Kroll was commissioned. Within the report, Kroll recommended the sale to shareholders, valuing the HCF business between $26 million and $28 million.
Prior to the withdrawal of the sale, the offer on the table was for $35m in cash and 150 million LFS shares which as of yesterday’s close ($1.40) would have been worth $210 million. LFS shares however have also followed the wider market downturn having closed at $2.04 when the acquisition proposal was formalised.
While Abercrombie has been vocal in his belief that HCF can turn things around, others on the Board are less confident according to a trading update released yesterday by Humm.
“The trading environment is very tough for HCF, with intense competition, rising interest rates, and weakening consumer sentiment. HCF has experienced a reduction in net receivables, net yield compression and higher expenses,” said Christian before the Latitude sale was terminated.
“As a result, profits are materially lower as compared to this time last year – year-to-date Cash NPAT is down approximately 61%. Without enhanced scale, which the Latitude
Alfred Chan is an Analyst at Emerald Financial, specialising in ASX-listed small cap companies.
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[…] Humm and Latitude call off sale despite BNPL woes as rogue Director outmuscles Board […]
Reply[…] Directors all tendering their resignation, leaving Andrew Abercrombie as the sole member, following the failure of its sale to Latitude Financial (ASX: […]
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