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The SME lender has entered into an agreement to be acquired by a consortium led by investment managers Salter Brothers Tech Fund.
ASX-listed lender Prospa Group Limited (Prospa) has revealed that it has entered into a scheme implementation deed that will see a consortium led by the Salter Brothers Tech Fund acquire 100 per cent of the ordinary shares in Prospa.
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The SME lender, which works with more than 16,000 brokers, accountants, and aggregator partners in Australia and New Zealand to distribute cash flow lending, has provided more than $3.9 billion to SMEs since opening its doors in 2012. It listed on the ASX in 2019.
The Salter Brothers Tech Fund – led by Gregg Taylor – seeks to buy Prospa to add to its specialist equity, credit, and property portfolio.
Under the acquisition, Prospa founders Greg Moshal and Beau Bertoli will continue in their positions at the company and it is expected that senior management will do so, too.
Speaking to The Adviser about the news, Mr Bertoli stated: “In the past 12 years, we’ve helped more than 54,000 small businesses in Australia and New Zealand with $4 billion in tailored, online funding to help grow their business. Now it’s time to double down on the next decade.
“We couldn’t have achieved what we have so far without the support and dedication of the community of thousands of partners we work with day in, day out to deliver the best financial products for small business. The next era of Prospa will allow us to do even more together.
“Brokers won’t see any change to how we do business with them and their clients but, should the transaction proceed, becoming a private company should allow us to double down on our mission and work more closely with the community of brokers we work with day in, day out.
“We are in it for the long haul and believe this is a new era for Prospa, and an opportunity for us to refocus our efforts on what we do best – helping small businesses unleash their potential.
“As always, we’ll continue [to] review our plan and objectives – looking at what is the right size to execute on our strategy and build a strong, sustainable, and profitable Prospa.”
What does the deal entail?
Prospa shareholders will have the option to choose between receiving a cash consideration of $0.45 cash per share or electing to roll over their shares for new ordinary shares in PGL HoldCo Limited, an unlisted newly incorporated public company that will serve as the new holding company for Prospa post-implementation.
Prospa has agreed with its lender iPartners to amend the iPartners facility agreement to allow Prospa to on-lend up to $12 million to the consortium in order to fund part of the cash consideration (subject to approval by Prospa shareholders).
The deal – which is dependent on Prospa shareholders agreeing to the deal – will require approval by the Foreign Investment Review Board and the NSW Supreme Court.
Gail Pemberton, Prospa’s chair, said that the move would benefit shareholders, with the independent board committee finding that the transaction represents a premium of 26 per cent to Prospa’s trading volume-weighted average price (VWAP) since its last earnings update.
As such, the independent board committee of Prospa has unanimously recommended that shareholders vote in favour of the scheme (in the absence of a superior proposal and contingent upon the independent expert’s conclusion that the scheme is in the best interests of Prospa shareholders).
The scheme implementation deed does not contain any exclusivity provisions, allowing Prospa’s independent board committee to engage with other potential bidders, although there is no certainty of alternative bids emerging.
Shareholders will have the opportunity to vote on the scheme and the iPartners Funding at meetings anticipated to be held in July 2024. If approved, the scheme is slated to be implemented by August 2024.
Loan book growth continues to drop
While Prospa has been making moves to grow recently – having acquired a loan book earlier this year – the SME lender has been tempering its loan book growth in recent months.
According to its most recent results, for the half year ended 31 December 2023 (1H24), its total originations were $308.3 million, down 27.4 per cent on the prior comparative period. This was led by a drop of nearly a third in New Zealand (down to $63 million), which Prospa said reflected its “deliberate tightening of credit settings”.
Closing gross loans reduced to $807.4 million in December 2023, down 5.6 per cent on the $855.8 million in the same period in the financial year 2023 and down 6.4 per cent on the previous half (2H23: $862.2 million).
Net bad debts remained elevated at $53.7 million and increased to 12.9 per cent (annualised) of average gross loans (up from 12.5 per cent in 1H23).
Mr Moshal, co-founder and chief executive, said: “Prospa has continued to uplift its credit risk management to help navigate a challenging economic environment. We are also delivering on our product and technology roadmap, with all new customers now originating on our new platform.
“We’re pleased to acquire Zip Business’ Australian performing loan book, which enables us to execute on opportunities that further unleash the potential of small business.”
[Related: Prospa reports 27% drop in originations]
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