Australian Finance Group (ASX:AFG) share price lifts on acquisition news

The mortgage broking group is acquiring a 75% stake in Fintelligence. Here are the details

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The All Ordinaries Index (ASX: XAO) is having a fantastic day today, shaking off yesterday’s market blues. At the time of writing, the All Ords is up a healthy 1.29% at 7,660 points. But one ASX share is topping even that robust performance. That would be the Australian Finance Group Ltd (ASX: AFG) share price.

Australian Finance Group shares are currently up a pleasing 3.5% at $2.63 a share. What’s the occasion? Well, this rise is likely due to an announcement the company made this morning before market open.

Australian Finance Group announced it is acquiring a 75% stake in the asset finance aggregator National Finance Alliance Pty Ltd, which commercially trades as Fintelligence. This will set Australian Finance Group back $52.5 million, which will be “primarily funded” through a “new corporate debt facility”. 

Australian Finance Group share price rises amid acquisition

Australian Finance Group told investors that Fintelligence is a “fast-growing, technology-enabled asset finance aggregation business of scale which will drive further growth in AFG’s asset finance volumes and market share”.

As part of the deal, Australian Finance Group will also have an “exclusive option” to acquire the remaining 25% of the company over the next 3 and a half years. That’s if Fintelligence achieves “agreed milestones”. Australian Finance Group is expecting the buyout to be completed by 31 December 2021. 

Australian Finance Group told investors that the tie-up will result in a combined 3,335 brokers at the company. That’s together with combined asset finance settlements of more than $1.7 billion per annum.

The company also stated the deal is “expected to be [earnings per share] accretive” in the first full year of integration. The funding structure will also allow Australian Finance Group to maintain its dividend policy.

Here’s some of what Australian Finance Group CEO David Bailey had to say on the deal:

This acquisition represents a significant opportunity to build a fast-growing, technology-enabled asset finance aggregation business of scale. 

It will drive growth in AFG’s asset finance volumes, market share for the combined group, and more lender and product opportunities for brokers and their customers. In addition, the acquisition allows AFG to increase the availability of white label and securitised asset finance products to meet the needs of our brokers and customers.

At the current Australian Financial Group share price, this ASX company has a market capitalisation of $683 million.

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Motley Fool contributor Sebastian Bowen 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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