Shares in digital consumer credit business MoneyMe Ltd (ASX: MME) jumped from the open today to trade as high as $1.90 in the green. The share price has since lowered to currently trade at $1.79, up 1.42%.
The upward spike comes following a company announcement that MoneyMe is set to acquire SocietyOne "to boost revenue, customer and profit growth".
It purchased the company on an implied acquisition price of $132 million, based on MoneyMe's 16 December 2021 closing share price, and assuming that the consideration is 100% MoneyMe shares.
The company says the transaction delivers a "powerful combination of two of the leading innovators in the consumer lending market and will harness SocietyOne's strong brand recognition as a pioneer in disruptive personal lending".
Both businesses have synergies that align with MoneyMe's s proprietary technology platform, Horizon, the release notes.
The collaboration is set to bring distribution capabilities spanning across direct digital, direct traditional, broker, agent and dealer, as well as delivering improved data and funding opportunities, MoneyMey says.
What is SocietyOne?
MoneyMe notes that SocietyOne is a pioneer and leading brand in disruptive consumer lending. For instance, it has a "strong net promotor scores (NPS) of +69 and a Product Review score of 4.7 out of 5.0", boasts a $392 million pro forma loan book, as well as pro forma unaudited revenue of $50 million in FY21.
The company has 25,000 active loan customers and 147,000 customers engaged in SocietyOne's "credit score wellness product".
MoneyMey also says that SocietyOne is backed by a "high quality shareholder base" that includes Seven West Media, Australian Capital Equity, News Corporation, Reinventure, Consolidated Press Holdings and G&C
Mutual Bank.
Why the collab?
MoneyMe had several justifications for its "strategic rationale" for the transaction. These include factors such as a 72% increase in MoneyMe pro forma loan book size to $934 million and pre-tax cost synergies of $17 million per annum.
It also views revenue synergies from SocietyOne's customer base, by reducing SocietyOne customer experience time to fund down from 1-2 days to around 1-2 hours with its Horizon platform.
The deal also unlocks new distribution opportunities, by expanding broker channels, accelerating financial wellness channels, whilst leveraging SocietyOne's credit score product with an approximate 147,000 customer base.
Aside from this, MoneyMe intends to leverage the "power" of combined data. For instance, there is over $2 billion of combined customer origination data in the collaboration, "enabling increased revenue and improved credit risk management through advancements in credit underwriting, artificial intelligence (AIDEN), marketing and customer behaviour analysis".
With respect to financials, the company sees an 86% increase in its FY21 combined pro forma revenue and $146 million in annualised revenue. This represents a 63% increase for MoneyMe on a standalone basis.
Management commentary
Speaking on the announcement, Clayton Howes, MoneyMe's Managing Director and CEO said:
The SocietyOne acquisition combines two of the most widely recognised consumer credit disruptors to deliver immediate scale advantages and incremental revenue opportunities. The strategic value is immense for both businesses, and we are incredibly excited. The opportunity to accelerate growth and cost efficiencies are quickly realised by combining the strengths of both brands and migrating SocietyOne operations onto MoneyMe's high-tech Horizon Technology Platform. The SocietyOne brand will continue to thrive and will benefit from access to MoneyMe's diversified product set and ability to deliver leading customer experiences.
Howes added:
There are many new innovations we will expand on, including the SocietyOne credit score product which will be brought to the MoneyMe customer base and the Banking-as-a-Service partnership with Westpac that we will continue to explore.
