Private equity firm Affinity Equity Partners has hired investment bank Goldman Sachs to explore sale options for its Scottish Pacific business in a deal set to be worth over $1bn.
It is understood that while the Wall Street bank is on the ticket, it remains early days in the moves by the group to divest the business lender run by the former Bank of Queensland boss Jon Sutton.
Scottish Pacific was purchased by Affinity in 2018 for $630m and has more than doubled the group’s loan book in the last five years to $2.1bn, which suggests an asking price would be well beyond $1bn.
It has also tripled its customer base in that time frame.
Affinity was said to have paid about 19 times Scottish Pacific’s profit when it was purchased, but that was in a different market.
ScotPac has funded $23.9bn annually over 35 years, offering trade, asset, invoice finance and business loans.
It was floated in mid-2016 with a market value of $440m through Citi and Goldman Sachs.
At that time it had annual revenue of $108.6m.
Before it was listed, Scottish Pacific was bought by a consortium led by Australian private equity firm Next Capital and management in 2013.
Sources say that one of the companies that may look at the business is the Australian-listed Judo Bank, which embarks on equipment finance, although Scottish Pacific leans more towards invoice financing.
The top four banks may also be targeted as prospective buyers.
There had been suggestions in the past it could look at a price of between one and three times its book value.
Market experts believe that a sale would be more likely for Scottish Pacific than a float, given where listed non-bank lenders are currently trading in the market.
The share prices of Pepper Money, Liberty Financial and Latitude have all failed to gain traction after listing in recent years, with the sellers still holding major positions in all.
The situation is having a flow-on effect to other listed peers, and it means that gaining a buyer prepared to pay up for a non-bank lender in the private market can also remain a challenge.
However, perhaps a buyer would be keen to capitalise on a market recovery linked to an anticipated decline in interest rates next year, calling the bottom of the market with small businesses under pressure and reigning in spending in the current environment.
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