Abercrombie buys more shares to block Humm sale

Dissenting director Andrew Abercrombie has steppedup his battle with the Humm Group board over the proposed sale of its buy now,pay later business to Latitude Financial, buying more than 5.2 million shares.

In a statement to the ASX late onMonday, Mr Abercrombie revealed he had bought another 2,662,028 shares for$2,065,591, adding to his existing 100 million shares, which represents about20.5 per cent of Humm.

Since Friday, when the statement wasdated, Mr Abercrombie confirmed he had purchased a further 2.6 million sharestaking his total buying since the dispute went live to 5.2 million, adding justover 1.1 per cent to his holding, below creep provisions.

The sale needs the backing of 50 percent of shareholders to go through.

He took aim at Humm’s board again on Monday, notingit had taken a week to get the chairman’s approval to buy shares.

“Increasing my stake in Humm Group confirms thatI’m prepared to put my money where my mouth is when it comes to my belief inthis company – and its value,” Mr Abercrombie said.

“The sale proposal now before shareholderssignificantly undervalues the business and would leave shareholders withLatitude shares, which have fallen in price since the announcement. These arethe key reasons why I continue to oppose the sale.”

Tamim Asset Management’s head of Australian equitystrategies, Ron Shamgar said last week he intends to vote against the Latitudeoffer. He represents about 2 per cent of Humm’s share register and said he hadspoken to investors who constitute another 8 per cent to 10 per cent whoexpressed reservations about the deal.

Latitude is offering $35 million in cash and 150million in shares to purchase Humm’s consumer finance assets, which include itsbuy now pay later businesses Bundll, Humm, Humm90 and HummPro. Humm wouldremain listed and keep its commercial finance arm called Flexicommercial, abusiness Mr Abercrombie founded, after the sale.

Mr Abercrombie argued the terms of the sale areskewed too far in Latitude’s favour.

“This transaction is expected to deliver 22 percent of Latitude’s financial year 2023 earnings of $355 million, but Hummshareholders are only offered 13 per cent in the combined group,” MrAbercrombie said.

“As part of the deal, Latitude is getting $106million of our own cash on our balance sheet – money that, as a shareholder,you already have an interest in prior to the sale! However, Humm shareholderswill only receive a paltry $35 million in cash or 7¢ a share, with the rest ofthe purchase price being paid in Latitude shares. How is this fair?”

Humm’s board, led by chairmanChristine Christian, have argued that the rout plaguing the buy now pay latersector makes the deal, which comes in the absence of a superior offer, anattractive one for shareholders.

But Mr Abercrombie’s letter argued that the boardhad not conducted a public auction.

“The best way to maximise the price... is to ensurethat all potential bidders are included in a transparent process,” he said.

“As Humm’s largest shareholder, your and myinterests are aligned, and I don’t believe that the offer on the table today,is anywhere near the best price that Latitude or any other bidder would beprepared to pay for [the consumer finance assets] if the board had conducted apublic auction sale process for this global business.”

The board responded saying it is incumbent on MrAbercrombie to find a higher offer or outline his plans to take on thedeteriorating macroeconomic environment, describing Humm shareholders as“long-suffering”.

“It is incumbent upon Mr Abercrombie to outline hisplan to his fellow, long-suffering shareholders so that they can make a fullyinformed decision,” he said.

Non-executive John Wylie is Humm’s second-biggestshareholder after Mr Abercrombie, with about a 5 per cent stake purchased via aplacement at the height of the market’s excitement about the buy now pay latersector for $1.25 a share through his Tanarra Capital investment vehicle in2019.

Tanarra subscribed for its full entitlements in a2020 raising and Mr Wylie is understood to own a further 2 per cent of Humm’sequity through a family trust.

Shares in Humm closed at 81¢ on Monday.