Latitude to acquire Humm’s consumer lending division as BNPL cools off

It’s confirmed- and whilst it doesn’t have the same scoop-your-jaw-off-the-floor effect as Afterpay’s (ASX: APT) $39 billion takeover from Square, Aussie grown BNPL Humm’s (ASX:HUM) consumer lending division is being acquired by Latitude Group (ASX: LFS). 

The deal is expected to bring $55 million in annual synergies for Latitude which are anticipated to be fully realised by the end of 2023. On top of this, Humm is expected to generate $35 million in pre-tax cash earnings for 2023, seeing Latitude bank over $90 million over the next year from the acquisition alone.  

With over 2.6 million customers and merchant relationships spanning over 60,000 retailers, Humm has long been an established brand. The Company holds a strong position in the Australian BNPL landscape, with net receivables of $1.8 billion. 

“The acquisition of Humm’s consumer business is a great outcome for both Latitude and Humm shareholders,” said Latitude CEO, Ahmed Fahour.

“The Transaction will deliver significant synergies and shareholder value, cementing our position as the leading instalments and consumer lending business in Australia and New Zealand and accelerate our international expansion. Humm’s consumer business is a great fit for Latitude given Humm’s capability in big and small ticket BNPL and its merchant base, providing additional scale to Latitude at minimal marginal cost.”

That little orange bird doesn’t come without cost, with Humm set to collect 150 million LFS shares and $35 million in cash, taking the total consideration to $335 million and leaving Humm with net tangible assets of $190 million.  

Latitude is keeping Humm’s leadership largely intact, inviting Humm Group CEO Rebecca James to lead the combined BNPL business, and bringing two independent Humm directors onto the Latitude Board. 

Humm Chairman Christine Christian AO said: “This is a transformational transaction for Humm group. The combination will create a leading pure-play consumer finance business, a significant and profitable company able to compete at scale and build Humm Consumer’s track record of building award winning products and experiences that customers love.”

The idea of acquisition was floated last month following rumours that Bank of Queensland was exploring the possibility of Humm, shortly after which BOQ denied. 

Humm will continue to exist as a commercial entity, lending largely via brokers to small and medium businesses. 

The transaction is subject to regulator and shareholder approval following which Humm will internally restructure to divide up assets and talent between the two businesses.