An independent board has recommended the $74 million acquisition of non-bank Prospa by Salter Brothers Tech Fund in a move that has ramifications for the SME lender’s shareholders.
However, it’s “business as usual” in terms of Prospa’s operations, according to CEO Greg Moshal (pictured above left), as the company hopes to rebound from its shrinking loan origination books following tough economic conditions.
Under the proposal, a group of investors from Salter Brothers, a financial services and investment company that has $4 billion of assets under management, will acquire 100% of Prospa's shares. This will be placed in their new tech fund, which was formed in October last year.
The takeover would mean Prospa is priced at a fraction of its $610 million valuation when it was originally listed on the ASX in 2019. It would also mean that Prospa will become an unlisted company.
Moshal said that the scheme would “provide the company with greater flexibility to achieve its strategic goals” but emphasised that the company’s plans would not be affected.
“Prospa is still very much focused on our strategy and regardless of whether the scheme is completed into a full transaction, our focus is delivering and its business as usual no matter what,” Moshal said.
Prospa chief revenue officer Beau Bertoli echoed this sentiment, saying Prospa was still “very proud to serve tens of thousands of small businesses across Australia and New Zealand”.
“We’ve engaged almost 12,000 distribution partners across those markets and our service delivery, our expectations of ourselves, and how we support our customers and our partners through the good times and the tough times is unwavering,” said Bertoli (pictured above right).
“So, for us, the ownership structure of the scheme doesn’t change our commitment to those partners.”
Prospa shareholders can choose to cash out of $0.45 cash per share or rollover into PGL HoldCo Limited, an unlisted newly incorporated public company which will become the new holding company for Prospa after the acquisition.
The offer is priced at a 22% premium compared to the company’s last stock price close of $0.37 on February 26.
The Independent Board Committee (IBC) of Prospa unanimously recommended that shareholders vote in favour of the scheme, in the absence of a better proposal and subject to an independent expert concluding that it was in the best interests of the shareholders.
Prospa chair Gail Pemberton said, “for those shareholders seeking liquidity, the IBC notes that the cash consideration payable under the Scheme delivers certainty of value to Prospa shareholders in what has been an otherwise illiquid market for Prospa shares”.
Prospa will borrow up to $12 million from its lender, iPartners to partially fund the cash payments to shareholders. This requires shareholder approval.
The investors in Salter Brothers Tech Fund have advised Prospa that it expects to fund the remainder of the cash through equity committed by the venture capital fund.
Moshal said he wanted to make it clear that this wasn’t the executive team’s decision.
“What has happened is we’ve received a bid or an offer from a consortium led by the Salter Brothers that went through to the IBC, which myself, Beau, and Ross are not a part of, and they believe it’s a good result for shareholders,” Moshal said.
“Shareholders will ultimately be the ones to decide on whether this makes sense or not.”
A scheme booklet that will contain important information is currently expected to be sent to Prospa shareholders by May 2024.
The booklet will contain information relating to the scheme and the independent expert’s report on whether the scheme is in the best interests of Prospa shareholders.
Prospa shareholders will then have the opportunity to vote on the scheme at the scheme meeting and on the iPartners funding at a general meeting of Prospa shareholders to be held in conjunction with the scheme meeting, currently expected to be held in July 2024.
If the scheme is approved by Prospa shareholders and the other conditions are satisfied or waived, the scheme is currently expected to be implemented by August 2024.
The announcement came after tough half-year financial results (1HFY24) for Prospa, which were released today, showing loan originations down and mortgage arrears up.
However, Moshal said the results were generally expected because of the continued challenges in the small business economy such as heightened cost pressures and customer demand changes, and the company had tightened its risk appetite as a result.
“Prospa has continued to uplift its credit risk management to help navigate a challenging economic environment,” he said. “We are also delivering on our product and technology roadmap, with all new customers now originating on our new platform.”
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