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Court orders CML shareholders to vote on COG merger

by Annie Kane11 minute read
Court orders CML shareholders to vote on COG merger

Shareholders of non-bank lender CML Group – the parent company of Cashflow Finance – are to vote on its proposed merger with Consolidated Operations Group next month, following a federal court order.

In November last year, Australia’s largest equipment finance broking company, Consolidated Operations Group (COG) proposed to acquire all of the issued share capital of non-bank lender CML Group – the parent company of Cashflow Finance – in a merger deal.

The merger, which is subject to court and CML shareholder approval, aims to form a “leading financial services group focusing on servicing SME businesses in Australia”, with expected revenue of approximately $265 million.

Under the COG offer, CML shareholders would have the option to elect to receive 100 per cent of the scheme consideration in COG shares or receive a mixture of cash (at $0.24 per share) and COG shares. 


The Federal Court of Australia held the first court hearing for the scheme arrangement two weeks ago and has now made orders approving the despatch of the scheme booklet to CML shareholders and ordered that a meeting of CML shareholders be convened to consider and vote on the scheme with COG.

As such, CML Group shareholders will be asked to vote on the scheme of arrangement at a meeting to be held in Sydney on Wednesday, 5 February.

The CML board has recommended that CML shareholders vote in favour of the scheme, suggesting that it is “in the best interests of CML shareholders” and is “in line with both groups’ strategic objectives, including expanding in-house product capability for COG and delivering material cross-selling opportunities and enhanced scale for CML”.

According to the board, the COG merger would also result in a lower cost of funding due to “increased lending volumes” and “lower corporate overheads, including lower ASX and compliance costs”.

If approved by shareholders and the court, it is expected that the merger will take effect from 11 February 2020 and would see COG CEO Andrew Bennett assume the role of CEO of the merged group, while CML CEO Daniel Riley would become executive director. The board of directors would consist of multiple existing directors from both COG and CML.

The merger will see CML list on the Australian Securities Exchange (ASX) initially under COG. However, it is expected that a new name for the merged group will be agreed upon between the parties once the courts have approved the scheme of arrangement.

The scheme booklet, which includes benefits and risks of the scheme, has been registered with the Australian Securities and Investments Commission (ASIC) and released on the ASX.

Competing offer from Scottish Pacific

While the CML board is recommending that shareholders vote in favour of the COG scheme of arrangement, a separate proposal has been put forward by Scottish Pacific.

In December, CML Group announced that it had received an unsolicited non-binding indicative and conditional offer from Scottish Pacific Group Ltd (ScotPac) to acquire 100 per cent of the issued share capital of CML.

The offer is for total cash consideration of $0.60 per share, comprising $0.57 cash per share and permitting a fully franked dividend of $0.03 per share to be paid prior to completion. 

COG has said it has no intention to match the offer or increase its proposed consideration.

In the scheme booklet, CML chairman Greg Riley said that while the board will engage with ScotPac to “explore the potential to receive a binding offer that is capable of consideration of CML shareholders”, he said there was no certainty that such an offer would be received nor that any such offer would be a “superior proposal”.

RSM Corporate Australia was appointed as the “independent expert” to assess the merits of the COG scheme and concluded that the COG merger was in the best interests of CML shareholders in the absence of a superior binding offer from ScotPac and/or a superior proposal.

CML said it intends to make an announcement regarding the status of the indicative ScotPac proposal prior to the scheme meeting on 5 February.

[Related: Consolidated Operations and CML Group to merge]

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