Affinity and KKR likely FlexiGroup tyre-kickers

It comes after the Australian-listed non-bank lender announced on Wednesday that the operation was now subject to a strategic review. PICTURE: ZOE PHILLIPS

Affinity Equity Partners, Kohlberg Kravis Roberts and Japan’s Shinsei Bank are tipped to be the most logical buyers of FlexiGroup’s commercial and leasing business, with expectations it will now officially be placed on the market.

It comes after the Australian-listed non-bank lender announced on Wednesday that the operation was now subject to a strategic review after informal efforts were made to sell it last year.

Affinity Equity Partners owns the Australian small business lender Scottish Pacific, which looked at the FlexiGroup division last year, but walked away from a deal when it was unable to agree a price.

KKR owns non-bank lender Pepper Group, which is said to be a logical buyer, while Shinsei bank bought the ANZ UDC asset finance business in New Zealand for $NZ762m ($694m) in June and is said to be interested in similar assets to bulk up its operations.

Another player that has been active in the space is Cerberus Capital Management, last week buying Westpac’s vendor finance business, which has a $500m loan book.

A sale of the business was first flagged by DataRoom a year ago before this column revealed that Cerberus was a suitor.

Last year, analysts estimated that FlexiGroup’s commercial leasing division was worth about $280m.

But the $515m FlexiGroup was understood to have an asking price on the asset of about $300m and since that time, the market conditions have dramatically changed.

It had volume growth during the past financial year of 15 per cent, excluding the discontinued consumer leasing business.

The big question for buyers will be whether the sale also includes FlexiGroup’s closed lending book which has faced regulatory hurdles.

It comes as the group on Wednesday announced a $21.4m net profit for the 2020 financial year, down 65 per cent, and that it would raise $140m of equity, which market sources say follows pressure from its lenders to improve its balance sheet.

FlexiGroup is known to be close to Citi, which is working on its equity raising at $1.14 per share.

The raise is at a 12.6 per cent discount to the last closing price of $1.305.

It is by way of an accelerated non-renounceable entitlement offer, with $115m underwritten.

Shareholders will receive one share for every 3.2 held.

Founder and chairman, Andrew Abercrombie, who is FlexiGroup’s largest shareholder with a 23 per cent stake, will participate in the entitlement offer, offering $7.5m, or 22.7 per cent of his pro-rata entitlement.

Director John Wylie and backers bought into the company at about $1.60 per share and now hold about 5.2 per cent.

His interests will take up all of their entitlements.

It comes as FlexiGroup, which has plans to rebrand in the name of its buy-now-pay-later product Humm, announces a 65 per cent fall in annual net profit to $21.4m.