Latitude Financial’s owners are expected to upsize the retail component of its initial public offering after being met with overwhelming demand.
The non-bank lender that generates much of its revenue through its personal finance relationships with retailers such as Harvey Norman, Apple, JB Hi-Fi and Amart is set to list as a $2.6bn company on April 20 after locking in support from four Australian institutional investors at $2.60 a share and Japan’s Shinsei Bank, which is buying just under 10 per cent of the business for $300m.
The institutional investors are providing about $120m and Latitude is looking for at least $30m from retail investors in an offer that is likely to be upsized by the end of the week.
Retail brokers involved are Bell Potter, Ord Minnett and Escala and CBA.
However, the maximum raise will only be $200m, excluding the sale to the Japanese.
The plan is to sell only a minimal amount of stock and for the private equity owners to offload more shares over time once the company’s valuation increases on the market.
Latitude is owned by Deutsche Bank, Varde Partners and Kohlberg Kravis Roberts, which will emerge with about 65 per cent of the company once it is listed.
According to the prospectus, chief executive Ahmed Fahour will hold 0.3 per cent, but he has an option to buy 16.5m shares in March 2023 in three 5.5m tranches at $3.12 for the first tranche, $3.25 for the second and $3.50 for the thrid.
Some of the shareholders in the Varde fund that owns Latitude will transfer their exposure to Latitude via direct holdings in the company below the substantial shareholder threshold.
These include Australian institutions and a sovereign wealth fund.
According to the prospectus, Latitude generated $128.1m of net profit for the 2020 financial year compared to $158.4m in the previous corresponding year.
The offer price equates to 11.6 times its cash net profit and has a 6.1 per cent dividend yield.
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