Overall I'm pleased with the deal.
Values the consumer finance side at $0.68, of which HUM shareholders become apart of LFS which should gain synergies of circa $50m out of the deal, plus pay out a healthy 8% FF dividend along the way.
Although the main part I'm happy about is this leaves the commercial side with us/Humm, which based on the current share price should be the largest capital gains upside potential due to the following:
1. Current share price only values the commercial side at 0.24c - based on the 13x CNPAT paid for the consumer side, the share price for the commercial side should be more in the $0.75c - $0.80 range ($30m CNPAT annualised / 495m shares * 13 xPE).
2. Management have stated "Capital Management Initiatives" may occur following the split, for me I believe this will lead to a share buyback on market further increasing the above commercial share price / which I would prefer over a return of capital to SH.
Do I believe that the LFS share price will tank following the acquisition - No, I do not. I believe we may see an emotional reaction the first few days/week, but the share price will level out over the first month or two. I believe the people who sell out and react emotionally, are likely from a younger investor age bracket and likely have the smaller holdings of the group which are easily absorbed by the market - no offence intended, I've been there.
Overall I'm happy with the deal and look forward to the synergies and the re-rating of the commercial share price !
Have a good weekend all.
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