Armaguard looks to negotiate with customers, as clock ticks down on cash ultimatum

Australia’s biggest cash distributor has rejected a $26m rescue plan proposed by banks and other big customers, in a move set to force the industry into protracted negotiations.

Armaguard will enter into new negotiations with its key cash customers rather than accept a $26m rescue deal. Picture: NCA NewsWire / Nikki Short

Australia’s biggest cash distributor has rejected a $26m rescue plan proposed by the country’s biggest users of notes and coins, in a move set to force the industry into protracted negotiations over new supply deals.

Armaguard chief executive Mick Cronin issued a statement confirming the cash distribution company, which delivers 90 per cent of all bills and coins in Australia, would reject the ultimatum from the Australian Banking Association to sign on to a cash support plan.

Mr Cronin said the company would continue to operate despite earlier concerns over its financial viability, and would now work “constructively” with its customers to find “short term and long term financial solutions for the industry to remain sustainable”.

“Armaguard continues to operate its full suite of services and is confident that over the coming months, it will get the business onto a long-term, sustainable footing with appropriate support from the industry,” Mr Cronin said.

This will see Armaguard enter into negotiations with its key cash customers, in a bid to stitch up new deals to deliver bills rather than enter into a $26m rescue plan spearheaded by the ABA.

However, Armaguard will likely be held to commitments it signed under its acquisition of cash distribution rival Prosegur, which include potential price rises of inflation plus 7.5 per cent.

ABA CEO Anna Bligh said she was pleased Armaguard had committed to continuing operations, noting it was “entirely up to Armaguard to decide how to fund their business and the decision of the parent company Linfox to fund them is a welcome development”.

“The banking sector remains committed to ensuring cash is accessible for customers,” she said.

The move by Armaguard to walk away from the deal comes after signalling concerns with the terms outlined by the working group of the big banks, supermarkets, retailers, and Australia Post.

Armaguard had already signalled it was walking away from the deal, which a working group of the big banks, supermarkets, retailers, and Australia Post, had issued last week.

The deal would have seen the major cash users fund Armaguard to the tune of $1m a week over 26 weeks.

This came after Armaguard and Linfox Group director Bill Kelty gave assurances to Reserve Bank of Australia Governor Michele Bullock the cash distribution business would continue operating in a meeting on Wednesday.

It also came as speculation mounted the deal would fall over, as businesses prepared themselves for a cash crunch over Easter.

Armaguard had warned previously its cash distribution business was not financially sustainable and risked insolvency.

But a late deal from the Linfox group and the Fox family, headed by scion Lindsay Fox, saw more cash pumped into Armaguard to safeguard it over the coming weeks.

Armaguard and Linfox baulked at attempts to push the cash distribution business to open its books to the consortium of key customers, including the big four banks ANZ, NAB, Westpac, and CBA as well as supermarkets and retailers Coles, Woolworths, and Wesfarmers and also Australia Post.

On Tuesday the ABA’s negotiating team and business leaders issued Armaguard a letter calling on the group to accept the funding package proposed on March 24.

A copy of the letter, seen by The Australian, shows the business heavyweights “express our disappointment with the approach which Linfox Armaguard Pty Ltd (Armaguard) has taken in relation to the offer”.

Linfox group and the Fox family, headed by scion Lindsay Fox, have pumped cash into Armaguard to safeguard it over the coming weeks. Picture: NCA NewsWire / Nikki Short

“In offering this support, the funding parties have relied on representations made by Armaguard,” they wrote.

“These include representations in your letter dated 23 February 2024 that you required emergency funding to continue to operate the cash distribution network in Australia beyond mid-March.”

The letter revealed Armaguard had pushed back on conditions proposed as part of the rescue deal, with “extensive requested changes”

This included six key sticking points.

The business leaders warned Armaguard “undermines the spirit of good faith negotiations aimed at supporting the ongoing operation of your business”.

Coles warned on Wednesday it would look to hoard cash over Easter, in response to the ongoing uncertainty around its supply.

The supermarket giant was understood to be concerned any orders it placed for new bills could see millions trapped on Armaguard’s trucks, in the event the cash distribution company were to collapse.

But on Thursday Coles said it had struck a new deal with Armaguard to resume cash deliveries from Armaguard.

““Coles can confirm that normal cash collection and processing services from Armaguard have resumed,” he said.

“Customers can continue to pay with and withdraw cash at Coles supermarkets and liquor stores this weekend and ongoing.”

Originally published as Armaguard looks to negotiate with customers, as clock ticks down on cash ultimatum