The finalisation of AFG’s merger with Connective has been delayed, with court proceedings progressing at a “slower pace than initially anticipated”.
In August, the Australian Finance Group (AFG) announced plans to acquire the assets and liabilities of Connective Group to create a significant national mortgage distribution network, with more than 6,575 brokers and combined mortgage settlements of $76 billion in FY19.
Under the transaction, Connective will receive $60 million in cash and 30,886,441 AFG shares.
This values the acquisition at $120 million.
However, the transaction is conditional upon court approval as well as approval from shareholders, the Australian Competition and Consumer Commission (ACCC), and other relevant parties.
In an address to shareholders at the group’s annual general meeting, AFG chief executive David Bailey revealed that the aggregator’s proposed merger with industry peer Connective has been delayed.
Mr Bailey noted that the merger is currently being assessed by both the Federal Court and the ACCC.
However, according to the AFG CEO, the court proceedings have progressed “at a slower pace than originally anticipated”.
Mr Bailey added that a final decision from the Federal Court is now not expected until the 2021 financial year (FY21), rather than 2H20 as originally reported.
Meanwhile, the ACCC is expected to make its determination in late January 2020, after reviewing submissions from stakeholders.
In his address, Mr Bailey also reiterated the perceived benefits of the merger, which he said would help AFG deliver on its ambitions in the market.
“Whilst we remain confident about the value AFG stands to generate from our existing ongoing growth plans, we felt successfully participating in the sale process undertaken by Connective absolutely aligned to our strategy,” he said.
“The proposed transaction offers exposure to an alternative mortgage broker aggregation model with strong ongoing brand recognition whilst also providing access to a broader distribution channel.”
Mr Bailey noted that under the plan, Connective brokers will have access to AFG’s white label credit products, which he said would provide the aggregator with the opportunity to “grow scale” in both asset finance and commercial lending through the combined distribution network.
Connective director Mark Haron has also previously touted the benefits of the merger for Connective brokers, stating that AFG’s securitisation program would give Connective “the ability to control and manage [its] destiny and help brokers manage theirs”.
Mr Haron added that the merged entity would also enable the two aggregators to “work as a combined force” in the compliance scrutiny and technology-driven era” and manage these “more effectively and efficiently”.
[Related: AFG volumes propelled by market tailwinds]
Charbel Kadib is the news editor on The Adviser and Mortgage Business.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.
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