A private equity firm has put forward a buyout proposal for the lender Humm Group, in a deal that is receiving backing from Andrew Abercrombie, the outgoing chairman , according to market sources.
Humm, a buy now pay later provider and non-bank lender that was previously called FlexiGroup, announced on Monday that it has received approaches from third parties to acquire all or part of Humm.
It said that Mr Abercrombie, the founding shareholder, who controls more than 20 per cent of the stock, has stepped down as a chairman, but he will remain on the board.
Deputy chair Christine Christian has been appointed as his replacement.
DataRoom understands that Mr Abercrombie, a Liberal Party powerbroker, has been in talks around the market over the past two months, making efforts to find a buyer of the business.
There are suggestions that a buyout fund has put forward a proposal worth about $1 per share and Mr Abercrombie is understood to have an involvement.
Some sources have suggested that there are questions surrounding whether the firm involved is able to fund a proposal.
Humm was also said to have received a separate proposal for its New Zealand leasing unit, valued at about $80m.
Latitude Financial is believed to have expressed interest in the non-commerical leasing aspects of Humm, but talks were understood to have gone cold due to differing views on price.
The company, which makes most of its funds from commercial leasing and card credit, indicated that it would hold talks surrounding the proposals to determine whether they were capable of becoming definitive offers that were in the best interests of the company and its shareholders.
Humm has drafted in Flagstaff and law firm Minter Ellison to offer assistance.
Its board is known for its robust discussions and differing views on company strategic direction.
The company had plans last year to sell its commercial leasing business to focus on taking on BNPL competitors like Afterpay and Zip.Co, but they were later placed on hold, amid talk of differing views in the boardroom about whether a deal made sense.
John Wylie is a director who owns more than 5 per cent of the business, and it is worth remembering the talk of Mr Wylie’s efforts to find a consortium to buy Boral soon after he became a shareholder of the country’s largest building materials supplier.
Kohlberg Kravis Roberts considered buying the business before it listed Pepper Money, but is understood not to be behind a Humm buyout.
Another private equity firm that has earlier circled Humm’s assets is Affinity Equity Partners, which owns Scottish Pacific.
Mr Abercrombie has made privatisation efforts in the past of what was then FlexiGroup.
KKR considered a deal where it would buy not only FlexiGroup but the General Electric Consumer Finance operation (now Latitude Financial) which was sold around the time to KKR, Varde Partners and Deutsche Bank for $8.3 billion.
It progressed on the plan but it is understood it was unhappy about paying 16 times FlexiGroup’s earnings for the business (the ratio it was trading at then) when it was buying the GE business at about 12 times earnings.
At that time, Mr Abercrombie was understood to have been keen to be a shareholder of the new GE and FlexiGroup entity.
Shares in Humm have collapsed from about $1.80 at the start of the year to 91c, with its market value currently at $367m after shares rallied 23 per cent after Monday's announcement.
On Friday, shares closed at 74c.
Sources have suggested that Humm would be keen to embark on a deal as it stares down the prospect of an equity raising next year, with BNPL providers facing the prospect of losses and the need to boost their cash reserves.
For the year to June, Humm’s BNPL segment generated $1.2m in net profit and the Australian cards division brought in $16.8m. It made $28.1m from cards in New Zealand and $22.3m from commercial leasing.
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