On behalf of the Majority Directors, I want to provide you with further background on our difficult decision to terminate the proposed sale of Humm Consumer Finance (HCF) to Latitude (Latitude).
The Majority Directors believed and still believe that there was significant strategic merit in the transaction. This view has not changed.
As you will be aware, Andrew Abercrombie undertook a strident campaign against the proposed sale, strongly encouraging shareholders to vote against the transaction. Much of the commentary he published was emotion-driven, inflammatory, and provided little clarity on what precise future strategy he envisages for HCF, or on what basis he believed Latitude were going to pay more for HCF. There is still essentially no clarity on the future strategy he envisages for HCF. Some of the information he published was false and misleading, which we instructed him to take down from his website. He persisted in telling shareholders to vote against the transaction.
During the extended period of preparation of sale documentation since key terms were agreed in early January 2022, Latitude’s share price declined by approximately 30%. In a largely scrip-based transaction, this meant the implied value of the sale consideration was considerably lower by the time of the vote than at the time we made the initial decision to recommend the transaction.
Given this, the Majority Directors asked Latitude to improve the terms of its offer, which it refused to do. Public pressure from Humm shareholders threatening to side with Andrew Abercrombie and vote down the transaction had no impact on Latitude’s position, which was unsurprising given the deteriorating economic environment, crashing sector stock prices and lack of any alternative bidding interest.
The Majority Directors believe Andrew Abercrombie overplayed his hand quite fundamentally in a transaction that could have been very beneficial for shareholders. The near 30% increase in the Humm share price to 93c when the transaction was first announced underscores the initial very positive market assessment of this deal before his negative campaign began.
The HCF group of businesses experienced highly challenging trading conditions for the five months to 31 May 2022, due to lower receivables, margin compression and expenses being incurred in its new product and international growth strategies - strategies which were embarked
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