Australian Finance Group Ltd (ASX: AFG) shares have started Friday’s trade under pressure. The Aussie mortgage broker’s share price is down more than 2% after an early morning market update.
Why are Australian Finance Group shares under pressure?
The big news this morning was a delay in its proposed merger with Connective Group. The deal to create Australia’s largest mortgage aggregator with nearly 40% of the broking market was first announced back in August 2019.
Australian Competition and Consumer Commission (ACCC) approval in June 2020 sent Australian Finance Group shares soaring. However, this morning’s update indicates that the proposed merger might be on ice for the time being.
AFG needed to achieve two key things by 31 August 2021 – ACCC approval and court validation of the transaction. It got regulatory approval but a court decision has not been reached despite hearings concluding in March 2020.
According to today’s release, the Australian Finance Group has “concluded that it is not likely that the merger will be able to complete prior to the expiry of the Implementation Deed”.
AFG CEO David Baily said, “The extraordinary length of time that the judgement has taken has blocked our ability to complete this transaction”.
“Disappointingly, this means the merger is not likely to proceed at this time”, he added. It seems as though investors are similarly disappointed by the news.
Australian Finance Group shares have dipped lower on the news, but it isn’t all doom and gloom. Mr Bailey noted, “The two businesses are very complementary, and we remain convinced the merger would deliver benefits to our brokers and customers”.
That provides some hope of a future deal between AFG and Connective, even if the current Implementation Deed expires. Despite today’s movements, Australian Finance Group shares remain up 52.3% in the last 12 months with a $700 million market capitalisation.