The Latitude Group Holdings Ltd (ASX: LFS) share price is trading slightly higher on Thursday morning despite the tech selloff.
At the time of writing, the lending company’s shares are up a touch to $1.97.
Why is the Latitude share price not being sold off?
According to the release, Latitude will pay a total consideration of $335 million for the consumer business, which comprises Humm’s buy now pay later (BNPL), instalments and cards operations.
The release explains that the $335 million consideration will be a mixture of cash and shares. Humm will receive $35 million in cash and 150 million Latitude shares valued at $2.00 each for the business.
Why acquire this business?
Latitude notes that at the end of June, Humm’s consumer business had approximately $1.8 billion of net receivables and $152 million of net tangible assets. The combination of the businesses would lead to more than $8 billion of receivables, over five million customers, and 70,000-plus merchants.
In addition, management highlights that it expects annualised combined synergies and cash earnings from the acquisition of Humm’s consumer business to exceed $100 million pre-tax in full year 2023, with $70 million of synergies including $50 million from duplicate costs and technology rationalisation.
In light of this, the transaction is expected to be double digit earnings per share accretive for Latitude assuming full run rate synergies.
Latitude’s Managing Director and Group CEO, Ahmed Fahour, commented: “Humm’s consumer business is highly accretive to Latitude’s shareholders. The proposed Transaction would enable us to accelerate the deployment of BNPL and instalment solutions for our customers and merchant partners in Australia/New Zealand and accelerate our growth in our international markets. It would also realise highly deliverable synergies which will enhance our financial performance and create significant shareholder value.”
The parties expect to sign definitive transaction documents by the end of January. Completion of the transaction will then be subject to regulatory, shareholder and board approvals, with both parties aiming to close the transaction before the end of June.