CBA is carrying out exclusive due diligence to buy the debtor and trade finance specialist ScotPac, say sources, just months after speculation surfaced that the pair had been in negotiations.
Both ScotPac, run by the former Bank of Queensland boss Jon Sutton, and CBA declined to comment on the speculation.
However, a source said that the due diligence was current, while another said that the CBA had been in exclusive due diligence to buy the business but this had been for some time.
It comes after the pair were said to be in discussions last year.
One market expert said that a deal made sense for the CBA, which was making efforts to get bigger in small to medium business lending and considers invoice financing – loans offered for the value of invoices not yet paid – as an area of growth.
CBA is Australia’s largest home loan lender and the country’s largest bank, and it was keen to bulk up its commercial banking business, they said.
Yet another market expert said that CBA could build a business like ScotPac from scratch and may not need to do the acquisition, questioning the logic.
ScotPac has funded $27.3bn of invoices over 30 years, offering trade, asset, invoice finance and business loans.
More than a year ago, a source said that ScotPac’s loan book was just under $1bn.
There were suggestions that ScotPac’s owner, Affinity Equity Partners, was looking for a price equating to three times the book value, but others say that in the current market, it would be worth one times.
There had been talk around the market that growth may have peaked at a time funding costs were rising in an inflationary environment.
Affinity Equity Partners purchased ScotPac in 2018 in a $630m buyout on the Australian Securities Exchange.
Private equity firm Next Capital led a consortium that floated what was then known as Scottish Pacific in 2016 after buying the business three years earlier.
At that time it had annual revenue of $108.6 million
Scottish Pacific was bought by a consortium led by Australian private equity firm Next Capital and management in 2013, and was floated in mid-2016 with a market value of $440m.
Working on the float were Citi and Goldman Sachs.
CBA has been relatively quiet on the deal front of late since divesting much of its non-core banking business including wealth and insurance operations.
Two years ago, it merged its Aussie Home Loans business with mortgage broker Lendi.
John Symond progressively sold Aussie Home Loans to CBA for about $660m in stock and cash between 2008 and 2017.
In 2020, it also sold a 55 per cent stake in its wealth manager Colonial First State to Kohlberg Kravis Roberts for $1.7bn, marking the end of its exit from wealth management and insurance.
All the banks have been selling wealth management and insurance divisions to avoid conflicts of interest highlight in a royal commission into banking during 2017, and since that time, banks have looked at other acquisition opportunities to boost growth.
ANZ Bank considered acquiring accounting software business MYOB from KKR for more than $4bn last year before buying Suncorp Bank for $4.9bn, while Westpac and NAB both considered recently buying the $730m eftpos payments business Tyro Payments.
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