Pepper Money (ASX:PPM) acquires 65% stake in Stratton for AU$78.0M

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Highlights

  • Pepper Money has signed binding agreements to obtain 65% interest in Stratton Finance Pty Limited for AU$78.0 million.
  • The purchase is subject to FIRB (Foreign Investment Review Board) clearance and other customary conditions precedent.
  • On a cash free/debt free basis, the deal values Stratton at AU$120.0 million.

Shares of consumer finance firm Pepper Money Limited (ASX:PPM) buzzed in green territory to trade around 4% higher at AU$2.160 a share today (4 April 2022, 10:15 AM AEDT).

The rise in the share price of Pepper Money can be attributed to the firm announcing 65% of acquisition in Stratton Finance.

Meanwhile, although the financial sector has been on a roll with 4% growth in one year, the firm has gone negative with an 18% decline. Over the last six months, the company's poor performance has persisted, with losses of 12 % and 1% on year to date (YTD). However, recently, the firm rebounded from its poor trend, with a 17% rise in one month. In addition, the S&P/ASX 200 Financials index (ASX:XFJ) was trading 0.12%  lower at 6,723.40 (at 10AM AEDT).

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About the companies

Stratton Finance is one of the top online direct-to-consumer asset finance broking platforms, with over 23 years of expertise.

Pepper Money is one of the most well-known non-bank lenders in New Zealand and Australia. Its main goal is to offer unique home loan solutions to individuals who traditional lenders have overlooked.

Pepper Money obtains stake in Stratton Finance

Pepper Money Limited has entered into binding agreements to obtain 65% interest in Stratton Finance Pty Limited for AU$78.0 million. The purchase is subject to FIRB (Foreign Investment Review Board) clearance and other customary conditions precedent and is scheduled for completion in Q3 CY2022. On a cash free/debt free basis, the deal values Stratton at AU$120.0 million.

Additionally, the parties have also agreed to a Put and Call Option with respect to the remaining 35% share in Stratton, which is exercisable from Q1 CY2024 to Q1 CY2026, at a base price of AU$42.0 million, indexed depending on Stratton's performance between the conclusion of the acquisition of 65% interest and procurement of the remaining 35%. At Pepper Money's election, the remaining 35% of the acquisition cost can be paid in Pepper Money shares or cash or a mix of both.

Management remark

Mario Rehayem, CEO of Pepper Money, stated:

Rob Chaloner, Stratton Finance Chair, commented:

Road ahead

Pepper Money launched its asset finance business at the end of CY2014, and it has since expanded to AU$3.9 billion in AUM. According to Pepper, acquiring 65% ownership in Stratton would allow them to accelerate the expansion of the asset finance business by utilising Stratton's extensive client data to continue developing unique client centred solutions and expanding direct-to-customer offerings.

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