Demand to be tested by $3.6bn Latitude float

The market for ASX floats is set for its biggest test in five years as Latitude Financial prepares a $3.6bn listing process.

Latitude CEO Ahmed Fahour. Picture: Stuart McEvoy.

The market for ASX floats is set for its biggest test in five years as consumer finance group Latitude Financial prepares to pull the trigger on a $3.6bn listing process.

As revealed by The Australian on Thursday, Latitude plans to release valuation research from its stockbrokers within days.

Bankers and lawyers are working full steam ahead to get the initial public offering done before the end of the year in a deal designed to give the finance company a market value of about $3.6bn.

Investors believe Latitude’s owners want the ASX listing to be priced at about 13 times the company’s annual net profit of about $280m.

The Australian understands Latitude chief executive Ahmed Fahour has held a number of informal meetings with fund managers in recent weeks to talk about the broader strategy ahead of an official IPO launch.

An investor roadshow is expected to begin offshore, ­followed by formal meetings with local fund managers.

A Latitude spokesman declined to comment on the IPO plans.

The company’s main products are personal and car loans, credit cards and insurance lines such as car and travel.

Earlier this month, Latitude also unveiled new digital payments platform LatitudePay, rolling it out first with retailer Harvey Norman.

Latitude is using it as a customer acquisition tool as it comes up against the likes of Afterpay Touch and Zip.

The market for IPOs has proven challenging in 2019.

Bouts of volatility have returned due to fears of slower economic growth and flare-ups in the trade spat between the US and China.

Fund managers will want to take a good look at Latitude’s numbers, forecasts for earnings growth and credit quality as they assess how the company will fare in coming years.

They are likely to compare Latitude to the trading multiples of the big four banks and other finance companies, including McMillan Shakespeare, Resimac, Afterpay and Prospa.

Goldman Sachs, Macquarie Capital and UBS are mandated to manage Latitude’s latest run at the bourse, and Law firm King & Wood Mallesons is handling the legal work, after an aborted attempt last year.

Latitude owners KKR & Co, Varde Partners and Deutsche Bank are hoping this time is different as they embark on what it likely to be the largest IPO since Medibank’s privatisation in 2014.

The three vendors will need to limit their respective selldowns, keeping enough stock on the table to ease the nerves of would-be investors.

Latitude’s listing will be a litmus test for investors and other vendors eyeing an ASX listing.

Other non-bank lenders are also closely watching how investors receive Latitude, particularly Pepper Australia, owned by KKR Credit Advisors, which is expected to test IPO markets next year. Citigroup, Macquarie Capital and KKR Capital Markets are said to be front and centre of work on that float.

Latitude has already done a lot of the administrative work for the IPO.

Several independent board ­appoint­ments were made in 2017, including former National Australia Bank finance chief Mark Joiner and former Insurance Australia Group executive Alison Ledger.

Mr Joiner is being touted as head of Latitude’s audit committee for the listed company board, which will be led by existing chairman Mike Tilley.

Former Australia Post boss Mr Fahour has been in the CEO post at Latitude for about a year, and has made a spate of personnel changes.

He replaced Sean Morrissey, who has returned to Britain.