Aussie CEO on the Lendi merger

The proposed transaction is set to combine Aussie’s brand and significant broker and franchisee network with the digital technology of online brokerage Lendi to create a “market leader” in the Australian home loan market.  

The two brands said that Aussie’s broker and franchisee network will “remain central to providing consumers with the support, choice and expert guidance in the sometimes confusing and complex process of securing a home loan”, while Lendi will continue to develop its technology and processes to “deliver better customer experiences and outcomes via its platform, home loan consultant and specialist teams”. 

Lendi shareholders will hold the majority shareholding of 55 per cent in the merged business, while Aussie’s current owner, CBA, will hold a 45 per cent shareholding and continue to provide funding for the Aussie Select branded home loan product. 

CBA will also receive deferred consideration and a pre-completion dividend of $105 million in aggregate (subject to adjustments). 

The merged business will maintain a multi-brand strategy and is expected to deliver a range of benefits for both customers and brokers, including: 

• providing more Australians with a greater choice of home loan lenders, products and ways to engage with their mortgage broker via in-person or online channels to “ensure they are getting  the best product suited to their individual needs”; 
• providing an opportunity for Aussie brokers and franchisee network to leverage Lendi’s technology and platform, including “integration with lender credit-decisioning engines and regulatory and compliance tools”; and 
• increased investment in both brands to “accelerate future growth and investment opportunities” as a merged business. 

CBA chief executive Matt Comyn said: “We believe the combined business will have a stronger platform to offer enhanced digital capabilities for Aussie brokers and a superior experience for customers.”

'One plus one plus equals five'

James Symond, chief executive officer of Aussie, said: “The merger is another important step in the almost 29-year evolution of Aussie as Australia’s leading retail mortgage broker. We are currently posting record lending volumes through our network of over 970 brokers and over 210 stores and, by underpinning Lendi’s technology across our national broker network, we will further accelerate this growth and momentum.”  

Speaking to The Adviser following the announcement, Mr Symond said that the deal is not expected to complete until mid 2021 and it therefore "continues to be business as usual at Aussie".

He added that the broker and franchise network would "remain central to this deal today, and ongoing".

"The whole thing here is for one plus one to equal five," he told The Adviser. "So, we're taking the best out of technology and digital expertise with Lendi and combining them with the bricks and mortar, award-winning brand and broker network that Aussie has.

"The reason for the deal overall, ultimately, is to expand our net for greater customer choice. That's the ultimate reason why we're doing this; to be able to reach more customers, to reach more people, to do more business from a bricks and mortar point of view, and do more business from a digital point of view, for those customers who today and ongoing want to deal with the business in that manner."

He emphasised that while the strategy for the merger was still in the works, he said both brands would continue to exist in any future deal.

"Aussie brokers will always remain Aussie brokers," he told The Adviser. "The Aussie brand is a household, powerful, trusted nearly 30-year-old brand. And that will only grow. In fact, Aussie brokers will end up having huge opportunities with a gushing level of customers which Lendi attracts," the Aussie CEO said.

"This is a huge, bright light that shows we are charging into the 21st century with the best technology through Lendi. This has really sped up our advancement into the digital stage, and created one hell of a business."

"This is about evolving and growing both businesses. So, certainly, we want to grow the Lendi business and the Aussie businesses separately, but enjoy some synergies that come with that, potentially, in the future. This will be the successful combining of two complementary brands - one more youthful the other - that will see one plus one equal five, and create one hell of a dynamic business into the future that can capture more and more customers and meet their needs.

"It gives our customers and our brokers the strength of an incredible distribution network, an incredible and trusted household brand, and an incredibly powerful platform to ensure that they get the very best of what is to be offered in the market."

Mr Symond said that while no decisions had yet been made on the executives of the new company, he was certain he would be "participating in the business for some time".

David Hyman, CEO and co-founder of Lendi, said: “This is an exceptional opportunity to drive the growth and digitisation of two companies that have led disruptive change for the benefit of customers in the Australian home loan market. 

“Lendi was born digital. Our technology, platform and people have revolutionised not only how Australians access home loans, but also market transparency. The role of digital technology in strengthening customer outcomes, compliance and operational agility is only growing in importance, and by coming together with a robust and trusted business like Aussie, we will be able to drive even stronger outcomes for more home owners and brokers alike.” 

Speaking to The Adviser, Mr Hyman added that customers of both channels would be assured that both platforms would be working under a Best Interests Duty, noting that Lendi has had a self-imposed duty since 2017.

He said: "At a high level, both Lendi and Aussie independently will need to implement BID as it rolls out on the 1 January. On the Lendi platform, we've codified the compliance experience so the obligations under BID are built into the process and the technology so we have an audit layer, an observation layer etc.

"So, as we start to roll out the Lendi platform to Aussie brokers in time, there'll be some enhancements to the implementation of BID. But from day one, it's very much the two business implementing BID side by side."

Completion of the transaction is subject to ACCC approval and other customary conditions and is expected to occur by “mid calendar year 2021”. 

Major changes in aggregation space

The move (which has been in the works for several months) comes amid a range of upheaval and consolidation in the aggregation space.

Moves are underway to create the largest merged aggregation entity in broking via the proposed $120-million merger between AFG and Connective. 

In June of this year – and after several delays and rounds of consultation – the Australian Competition and Consumer Commission (ACCC) said that it would not oppose the merger between the two groups. 

The transaction is subject to court approval (a non-customary condition), which has already begun.

Last month, another major bank, NAB, announced that it had entered into an agreement to sell 100 per cent of its broker aggregation businesses – PLAN Australia, Choice and FAST – to major brokerage brand and aggregator Loan Market Group.

While the purchase would see the four businesses – Loan Market, PLAN Australia, Choice and FAST – run independently of one another (and continue to have their own respective aggregation agreements, leadership, and corporate sales and marketing teams), it would mean that more than 5,000 brokers would be operating under the aggregators owned by the group – or just under a third of the active broker market.

If all obligations and approvals are obtained, completion is expected to occur in early calendar year 2021.

[Related: 2021: The year of aggregation consolidation?]