Australian Finance Group
A$120m Acquisition of Connective Group
On 12 August 2019 AFG announced it has entered into a binding conditional implementation deed to merge with the mortgage aggregation business Connective Group Pty Ltd.
Under the transaction, Connective Group Pty Ltd will receive $60 million in cash and 30,886,441 AFG shares valuing the acquisition at $120 million, with AFG to primarily fund the cash component through a new corporate debt facility. The transaction is expected to be EPS accretive (pre-synergies) in the first full financial year post integration and AFG is currently expected to maintain a dividend payout ratio of between 60 and 80 per cent.
AFG was established in 1994 and has grown to become one of Australia’s largest mortgage broking groups and leaders in financial solutions.
Mortgage aggregator Connective Group has a network of over 3,600 brokers providing access to a range of financial products sourced from its panel of more than 50 lenders. Acting as an intermediary between lenders and borrowers, Connective Group offers services across residential, commercial and asset finance, as well as its own range of white label home loan products under the Connective Home Loans brand.
The combined group will create a significant national mortgage distribution network, with more than 6,575 brokers and combined mortgage settlements of $76 billion in FY19.
The transaction remains conditional upon a court validating the transaction as not being unlawful or able to be set aside (a non-customary condition), Connective Group Pty Ltd shareholder approval, approval from the Australian Competition and Consumer Commission and AFG Shareholder approval (if required), as well as other conditions typical of a transaction of this nature.