Banks, retailers stump up $50m for Armaguard bailout

A $50m bailout, funded by banks and retailers, will prop up the nation’s biggest cash distributor for a year.

A $50m lifeline has been handed to Armaguard, funded by the major banks and retailers. Picture: Nikki Short/NCA NewsWire

Armaguard has been handed a $50m lifeline after doing a deal with the nation’s major banks and retailers to prop up the cash transporter for a year.

The agreement, announced on Monday, will kick in on July 1 and provides a $50m handout to Armaguard, owned by billionaire business magnate Lindsay Fox.

Linfox and Prosegur will tip a further $30m into the cash distributor in the coming months, Linfox Armaguard executive chairman Peter Fox confirmed to The Australian.

The multi-party deal secures the distribution of cash around the country for the coming 12 months and will see Armaguard subject to regular performance hurdles as it works on turning around the business.

The money will be jointly provided by Australia’s big four banks – ANZ, CBA, NAB and Westpac – along with four of the largest retailers in Wesfarmers, Coles, Woolworths and Australia Post.

The funding is contingent on Armaguard agreeing to efficiencies and cost savings as part of a series of conditions under the bailout.

Armaguard will need to meet monthly key performance indicators through the year, with the $50m to be paid out in instalments subject to performance hurdles being met. These hurdles will be reviewed by an independent forensic accountant, as agreed by all parties.

It comes after a tense few months following the breakdown of an earlier agreement sought between the parties.

“Part of the problem is there’s a little bit of mistrust between the parties. We’re not sure what’s causing this mistrust, we don’t know where it’s coming from, but my family has carried over $150m worth of losses over the last three years that has predominantly been incurred by the major banks in this country,” Mr Fox said.

“But we want to look forward now, we will work cooperatively together with the eight parties because we want to see cash remain in the Australian economy as legal tender.”

The scheme was agreed with the Australian Banking Association and has been sent to the competition regulator for sign-off given the unusual situation of major competitors tipping in cash to save the distributor.

“This deal will keep cash moving around the country and ensure it remains available to Australians wherever they live,” ABA chief executive Anna Bligh said.

“The 12-months of financial support also gives Armaguard the necessary time to restructure the business and realise the benefits from their merger with Prosegur. It also allows all parties to work through possible long-term solutions for sustainable cash access into the future,” Ms Bligh said.

Armaguard delivers 90 per cent of all bills and coins in Australia but has been in financial peril amid a steep fall-off in the use of cash across the country.

Mr Fox said Armaguard will now focus on further integrating the Prosegur business as well as working more cooperatively with the major lenders. But a big shift away from customisation in its dealings with the banks and retailers is key for the cash distributor’s long-term viability, he added.

“We need to move to more of a standardisation model that can bring efficiencies that we can then pass on to the eight parties,” Mr Fox told The Australian.

This would potentially see Armaguard deliver cash to banks and retailers in certain areas on set days, to save on transport costs.

The next step would be moving toward a stage establishing independent pricing, he added.

“Beyond this interim funding that has sustained (Armaguard’s) viability … The most important commitment that we’ve made in today’s deed is agreeing that in the not too distant future we work together, as a collective group, to agree on what is reasonable pricing,” Mr Fox said.

The deal comes months after Armaguard warned its cash distribution business was unsustainable, amid low margins and higher costs. This is despite the merger of Armaguard with rival cash distributor Prosegur in mid-2023.

The issue came to a head at Easter when supermarkets hoarded notes to protect themselves from the potential collapse of the cash distributor.

Mr Fox in April accused the big banks of misusing their market power to push cash distribution companies to unprofitability. At the time, Armaguard was hoping to renegotiate a number of new cash supply deals with the banks individually, but this was deemed unworkable, with the collective group instead seeking a joint deal.