Latitude (ASX:LFS) share price rises on $200m Symple acquisition

M&A activity continues to heat up…

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The Latitude Group Holdings Ltd (ASX: LFS) share price is rising on Monday.

In morning trade, the instalments and lending company’s shares are up 3.5% to $2.37.

Why is the Latitude share price racing higher?

Investors have been bidding the Latitude share price higher today after it announced an agreement to acquire Symple Loans for $200 million in shares and cash.

According to the release, Symple is a Melbourne-based personal lending fintech. It uses state-of-the-art global technologies, advanced analytics, and proprietary risk-based pricing techniques to deliver simple digital experiences to customers and brokers, fast approvals, and same-day settlements.

Following completion, Symple will become the lending platform for all Latitude personal and auto loans, ~160,000 customers, and its $2.5 billion loan portfolio.

Why acquire Symple?

Management explained that Latitude will leverage Symple’s platform to support its existing business, launch new products, and build partnerships with other lenders.

It will also expand its auto loans business into New Zealand and personal loans into Canada through Symple’s established North American operations.

The purchase of Symple is expected to accelerate growth in Latitude’s loan portfolio and reduce costs, with anticipated in-year synergies starting in the second half of FY 2022 and growing to $32 million before tax in FY 2023.

This equates to an in-year 9% cash net profit after tax accretion based on the average analyst forecasts for FY 2023.

The release notes that the transaction is intended to be funded by the issue of 38.46 million Latitude shares at $2.60 per share and $100 million in cash.

Based on this, in-year cash earnings per share accretion is expected to be 5% higher in FY 2023 compared to the average analyst forecasts.

Latitude’s Managing Director and CEO, Ahmed Fahour, said: “This is an exciting and important opportunity for Latitude that will accelerate our growth plans. Symple’s scalable platform will enable Latitude to offer a wider range of products and product features in Australia and New Zealand, enter new geographies and significantly reduce costs while delivering superior customer and partner experiences.”

“Latitude will enhance its existing strengths, including its 2.8 million customers in Australia and New Zealand, rich data, risk capabilities and funding capacity, by adding Symple’s digital expertise, agility and proven technology. The addition of Symple’s founders Bob Belan and Paul Byrne will further strengthen our management team,” he added.

Should you invest $1,000 in Symple right now?

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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