Existing shareholders of troubled ASX-listed buy now pay later provider Splitit Payments Limited are set to lose control of the company under a US$50 million rescue plan struck with US private equity firm, Motive Partners.
Splitit’s board, which earlier this week announced plans to delist from the ASX, yesterday dropped another surprise on the company’s long-suffering shareholders by releasing details of the transformational private equity deal.
Motive Partners, which has its main offices in New York and London, is a global private equity player with a focus on investing in technology-enabled banking and financial services businesses.
Under the deal with Splitit, Motive is proposing to sink US$50 million into the company by the middle of next year in return for a right to control the majority of appointments to the board of the business.
The deal involves Splitit migrating its corporate structure from Israel to the Cayman Islands and then merging the business with a Motive-controlled entity.
Apart from securing the support of Splitit’s Australian shareholders at the annual meeting to be held in September, the complex agreement requires approval from the Israeli and Australian regulators.
Motive intends to inject US$25 million into the business when all such regulatory hurdles are overcome.
This is to be followed by a second tranche investment before the end of June 2025 if Splitit meets certain financial performance targets relating to sales volumes and gross earnings.
The terms of the deal allow Motive to appoint three directors to the new entity’s seven-member board after the first tranche investment is made.
Motive would appoint a majority of directors once the full investment is completed.
Splitit chair Dawn Robertson described the “proposed transaction” as the best opportunity to create long term value for existing shareholders, but did not comment on what the passing of control could otherwise hold for owners of the company’s ASX-listed scrip.
In the filing to the ASX on Wednesday Splitit revealed that the securities to be issued to Motive would rank “senior to all outstanding ordinary shares and share equivalents”.
“We are delighted to secure this significant capital commitment from a world-class private equity sponsor,” said Robertson.
“Motive is the ideal partner to help us drive future value creation due to its extensive payments expertise, value-additive capabilities, and deep industry
relationships.
“The Board unanimously concluded that the Proposed Transaction represents the best available opportunity to create long-term value for Splitit’s existing shareholders.”
Splitit has a raft of prominent Australian investors sitting on its register, including Melbourne-based billionaire Alex Waislitz who holds a 9 per cent stake in the company.
Waislitz and most other large shareholders acquired their interests in the company at large premiums to the current share price of under 8 cents.
It is not clear whether Waislitz is supporting the Motive deal.
Splitit’s buy now pay later activities are mostly focused on the US market.
The business has struggled to generate returns since it listed on the ASX in January 2019.
The company’s share price peaked at $1.83 at the height of the pandemic in August 2020 but has progressively lost favour with investors in the three years since.
The company posted a net loss in the 12 months to the end of December of $US 23.3 million, an improvement on the 2021 loss of $US 39.6 million.
However, most of the improvement was due to deep cost reductions.
Splitit’s top-line revenue grew negligibly over the two-year period.