Former Humm chairman Andrew Abercrombie calls deal to sell consumer finance arm ‘flawed’

Former Humm chairman Andrew Abercrombie. Picture: AAP Image/Tracey Nearmy

Long-suffering shareholders at Humm, the former FlexiGroup business, would be bemused to see the most recent attempts by the company’s former chairman Andrew Abercrombie to derail the $300m sale of its consumer finance arm to Latitude.

Abercrombie, who remains the company’s largest shareholder, has said he would be open to selling the business for $470m – or preferably more.

The majority of Humm directors, and an independent expert, have recommended the deal at the current price and say that the value is fair.

In an extraordinary move, Humm directors on Monday warned its buy now, pay later unit had been unprofitable on an unaudited basis in the four months to April 30 after accounting adjustments, and urged shareholders to accept the Latitude offer.

But Abercrombie told The Australian on Thursday that “the deal in its current form is seriously flawed”. He says the company is making a profit.

The current offer is for $35m in cash and 150 million in Latitude shares – at the current share price, that puts the deal at $306.5m. That would be approximately 78 per cent of the total market capitalisation of Humm, despite the consumer finance arm representing less than half of the group’s earnings during the first half of the financial year.

This is one fact not lost on some supportive shareholders.

Then again, some would understandably be wondering what Abercrombie’s Plan B is, if the company cans the sale of the business to Latitude.

Between August 2015 – when Abercrombie was appointed chairman – and December 2021 – the last trading day before he ceased being chair – Humm delivered total shareholder returns of negative 66.1 per cent.

By comparison, the ASX 200 index delivered total returns of 88.4 per cent in that period.

Then there’s the regular speculation that Abercrombie was more than happy to offer up the business to interested parties.

In December, DataRoom reported that DataRoom understood that Abercrombie, a Liberal Party powerbroker, had been in talks around the market over the past two months, making efforts to find a buyer of the business.

Christine Christian took the chair at Humm on December 20 before announcing a transaction with Latitude in February. Shareholders are scheduled to vote on the contentious transaction at a meeting in June.

Despite the poor profitability of the business, Latitude is not backing away. It argues that the deal would give it economies of scale and access to Humm’s BNPL technology platform, which could extend to its users.