humm CEO Rebecca James
The humm board and management must regroup after the decision to call off the sale of its consumer finance business to Latitude, with questions over the future of chair Christine Christian, who clashed heatedly with founder, director and shareholder Andrew Abercrombie over the sale.
There may also be doubt about the future of chief executive Rebecca James, who would have moved over to Latitude if the deal had gone ahead.
In a joint statement to the ASX on Friday, Latitude and humm said the companies have mutually agreed, in light of current market disruption, to terminate the proposed sale of humm’s consumer finance business to Latitude.
Since the deal was announced in early January, Latitude’s share price has fallen 29.6 per cent to its Friday close of A$1.40 a share.
Consideration for the transaction was to have been 150 million Latitude shares and $35 million of cash, which in January put the sale price at $335 million.
Based on Latitude’s current share price, the sale price would have been $245 million, which is below the assessment of independent expert Kroll Australia that the humm consumer business is worth between $260 million and $309 million on a controlling interest basis.
Abercrombie has drawn attention to the impact of Latitude’s falling share price on the price humm shareholders would get and had called on the humm board to demand a bigger cash consideration from Latitude if the sale did go ahead.
On Friday, the Australian Financial Review quoted several fund managers, who were critical of the board for not doing just that.
They were surprised that the humm board would allow Latitude to walk away from a “watertight” binding contract.
But it also appears that Abercrombie, who holds around 24 per cent of humm, had won the support of other big shareholders and the board would not get majority support for the transaction.
Abercrombie has argued that there is value in the consumer finance business and good growth potential, while the board has argued that shareholders and the company’s commercial business would be “negatively impacted” if the sale did not go ahead.
It was only last Wednesday that Christian wrote to shareholders: “humm’s BNPL business is not profitable and is not growing. As a standalone, sub-scale business, the majority directors believes that HCF faces significant macro and structural headwinds, and the entire BNPL sector is under pressure.
“We strongly recommend all humm shareholders vote in favour of the HCF sale.”
Given these positions in light of the fact that the company will now retain the consumer finance business, Abercrombie is in a strong position to argue that he should lead the board through the next phase of the company’s development.