Affinity Equity Partners, the owner of finance company Scottish Pacific, has walked away from its agreement to acquire SME receivables finance company CML Group, citing events that may have constituted “a material adverse effect on CML’s business.”
CML chief executive Daniel Riley told investors on a conference call yesterday that the business was performing well and there were no breaches of the scheme implementation deed the companies had entered into.
However, Riley said the company’s lawyers had advised the board that legal action to enforce the deed would be expensive and time-consuming, with no certainty as to the outcome. The agreement was terminated by mutual agreement.
CML has lost two suitors in six months. In December, the board recommended a takeover offer from commercial finance broker Consolidated Operations Group.
Then in March it rejected COG’s bid in favour of what it saw as a better offer from Scottish Pacific.
COG came back with an improved offer but the CML board maintained its support for the Scottish Pacific bid.
Riley said: “In our view the transaction was binding but it comes down to issues like how you define ‘change in economic conditions’.”
Scottish Pacific will pay a A$1 million break fee.
Riley gave a business update, saying invoice volumes in the 10 months to the end of April were up 10.3 per cent. This includes Classic Funding Group, which was acquired last November. On a like-for-like basis volumes were down 2.4 per cent.
Riley said: “We are not losing clients but our clients are invoicing less. That will not be permanent.
“The best conditions for invoice financing and factoring are periods of economic stress. We provide funding quickly.”
CML has renegotiated one of three warehouse facilities, which was reduced from $140 million to $80 million. It still has $50 million of headroom under the facility.
All up, it has $320 million of funding capacity.
It is negotiating with the Australian Office of Financial Management for investment under one of its support schemes.
If it gets AOFM funding it will retire a corporate bond and the mezzanine component of one of its warehouse facilities, reducing its cost of funds in the process.
The company has forecast that full-year EBITDA will be around $20 million – in line with its 2018/19 performance.