BNPL outlier Latitude is eyeing market dominance with a new Humm merger deal worth $335 million
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Latitude financial, a challenger in Australia’s buy now, pay later space, has moved to acquire the consumer business of Humm, one of the space’s least popular players, as part of a deal worth 150 million shares and $35 million in cash.
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The deal, which was announced Thursday, would see Latitude take top spot among all instalments and consumer lending providers across Australia and New Zealand.
As part of the deal, Humm’s consumer business would be combined with Latitude’s pre-existing BNPL offering, while Humm’s shareholders would retain full control of the firm’s commercial business.
Humm chairman Christine Christian said the board is currently reviewing the deal.
“Humm’s board and management are committed to maximising shareholder value,” Christian said. “In this context, we believe that the Latitude proposal is potentially attractive to Humm shareholders and warrants due diligence and detailed negotiation.”
According to both parties, each has entered into a non-binding heads of agreement to “facilitate reciprocal due diligence” and the negotiation of a formal agreement, which will be bound by exclusivity until the end of January.
Both boards will have final say on the deal, come the end of the month.
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The deal arrives with a staggered delay, as investor interest in the BNPL space cools on the heels of a massive shake-up of Australian payment regulation, and the launch of a regulatory probe into the sector in the US.
According to equities Morgans equities analyst Richard Coles, the sector’s dominant players — particularly Afterpay and Zip — would need to deliver strong results in the first half of the year to reverse the sentiment.
“The sector is suddenly unloved by investors, so solid 1H22 results are required to change sentiment,” Morgans said. “We expect strong revenue growth for Afterpay and Zip, but we still expect both stocks to report (first-half) losses.”
Even still, Latitude fancies its odds, while Humm’s efforts to partner up in the space to avoid consumer abandonment have verged on survivalism.
Humm has been looking to buddy up for the better part of six months, after the firm’s chief executive Rebecca James showed interest in the idea as far back as August, when Block’s interest takeover of Afterpay was dominating headlines.
Block’s takeover deal with Afterpay has all but crossed the finish line, after Afterpay shareholders greenlit the deal in December. If Spain’s central bank gives the $39 billion deal the go-ahead as expected, Afterpay will snatch the mantle for Australia’s biggest-ever deal.
While investor interest has since cooled, both Zip and Afterpay emerged as clear favourites among investors throughout 2021.
Both companies closed the year among retail investing platform Superhero’s top five most-traded companies, with Zip ranking in first, and Afterpay in fifth.
Superhero CEO John Winters told Business Insider Australia the results weren’t much of a shock, as the curtain closed on a year where the BNPL space “has absolutely taken over the world.”
“You know, it was just an unstoppable freight train of gains that has obviously been accelerated by the fact that Square’s come in and paid $39 billion for Afterpay, and I think that gives a lot of credibility to the space,” Winters said.
“And then seeing the likes of CBA really embrace it as well, I think it has been really interesting. CBA made quite a decent investment in Klarna and helped them roll out in Australia, and then very quickly rolled out their own product.”
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