Yarra Capital, Perpetual, Perennial Value Management and Regal Funds Management in Latitude’s corner for IPO

CEO of Latitude Financial Services, Ahmed Fahour. Picture: Ian Currie

Yarra Capital, Perpetual, Perennial Value Management and Regal Funds Management have emerged as the Australian institutional investors that have offered cornerstone support for the float of the $2.7 billion non-bank lender Latitude Financial.

Shares of the company closed 10c higher on its first day of trade with the share price closing at $2.70.

This is after Latitude priced its shares at $2.60 each for its IPO, taking its market value to $2.6bn.

It raised about $120m from the four Australian institutional investors and about $80m from retail investors.

The price equated to 11.6 times its net profit.

The understanding is that the institutional investors had been engaged with Latitude for some time before offering $120m in IPO support as part of a cornerstone process executed through Insight Capital Advisors.

Latitude’s plan was to only sell down a small component of the company and advisers only went to the select group of institutions.

At the start of trade on Tuesday, shares soared 8 per cent, with the stock at $2.805 and they rallied as high as $2.99.

It comes after the group, owned by owners Kohlberg Kravis Roberts, Varde Partners and Deutsche Bank, made two earlier attempts to float.

Owners can sell down a portion of their 66.4 per cent stake progressively from February.

One of the drawcards for investors with the latest IPO is that they are eligible for a dividend payment for the first half of the year that equals $79m, equating to 7.85 cents per share, even though Latitude will be only listed for just over two months before the end of the half year.

Normally, the company will pay a yield of 6 per cent but over the eight month holding period in the first year it will equate to an annual dividend yield of about 8 per cent.

Run by Ahmed Fahour, Latitude specialises in consumer finance, with an interest free instalment business that is driven by long-term merchant relationships with companies including Harvey Norman, JB Hi-Fi, The Good Guys and Apple.

Joint lead managers on the IPO were Bank of America, Credit Suisse and Jefferies.

The thinking now is that KKR will likely progress with the float of its other non-bank lender Pepper Money given Latitude’s success.

Pepper Money’s management has scheduled meetings with investors this week as part of its IPO plans.

The Latitude market debut came on the same day Afterpay announced is pursuing a dual listing in the United States.

The buy-now-pay later service provider has tapped Goldman Sachs for the move and sources say listing on the Nasdaq Composite will raise the $36bn company’s profile in the US market where half of its shareholders are based.

It will also likely act as a precursor to further strategic partnerships, acquisitions or a takeover by another industry giant and create transparency surrounding valuation of the company from a currency perspective.