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Sydney-based humm group (ASX: HUM), a former buy now, pay later (BNPL) company that has changed its business model to "hybrid loans", is subject to a takeover offer from its chairman that implies a valuation of $285.7 million.
Following a downturn in the HUM share price from $0.68 at the start of the year to $0.48 at the close of trading yesterday, humm group chair and founding director Andrew Abercrombie's family office has lobbed a $0.58 per share takeover at the company.
The Abercrombie Group (TAG) and its associates already own 26.6 per cent of shares on issue at the company, meaning the non-binding offer equates to around $210 million that remaining shareholders would receive if it converts to a scheme implementation deed (SID).
Because of Abercrombie's existing stake, an independent committee of the board comprising non-executive directors Andrew Darbyshire, Teresa Fleming and Robert Hines has been formed to consider the offer. The committee will give TAG four weeks for due diligence that would enable the suitor to make a binding offer.
Humm was previously known as a buy now, pay later company for larger purchases, and in 2022 was the target of a $250 million cash-and-scrip takeover offer from Latitude Group (ASX: LFS) which ultimately collapsed with Abercrombie as a minority dissenting voice on the board at the time.
Highlighting a tough trading environment for the company's consumer finance business amidst "intense competition, rising interest rates, and weakening consumer sentiment", the company's then-chair Christine Christian AO noted profit was down 61 per cent due to a reduction in net receivables, net yield compression and higher expenses.
She claimed a transaction with Latitude would give humm the enhanced scale it needed, but Abercrombie claimed Latitude's offer grossly undervalued the company. A termination of discussions by mutual consent led to a board exodus.
Volatility has plagued humm's shares since then but are now trading at similar levels to when the deal collapsed with Latitude, whose shares have deteriorated by around 19 per cent over the same timeframe.
In the financial year that followed the Latitude deal falling through, humm's statutory net profit after tax (NPAT) plunged from $170.3 million in FY22 to $2.9 million in FY23 as the business rationalised costs and repositioned its consumer finance business.
In the first half of FY24 the company was running at a loss, but turned its fortunes around to notch a positive NPAT of $7.1 million for the year, while in the first half of the current financial year NPAT was up 555 per cent year-on-year at $27.3 million.
Nonetheless, a tightening regulatory environment and the departure of former CEO Stuart Grimshaw have contributed to an eroded share price. This month the company formally retired its BNPL product, renamed as humm Classic and not available for making new purchases.
Its replacement, a hybrid loan product with limits of up to $50,000, a long repayment timeframe of up to 120 months and a new app, is yet to launch in the Australian market where new BNPL regulations have been introduced.
In March the company anticipated further costs from ongoing enquiries with the corporate watchdog.
The company's consumer receivables stood at $2.1 billion at the end of March, with the agglomeration of its loans and receivables referred to as assets under management (AUM) at a value of $5.3 billion.
Angelo Demasi, a strategy, technology and transformation executive who became CEO after Grimshaw's departure, led an extensive review of humm's consumer IT platforms for the 12 months to 31 March, prompting modernisation efforts that include shifting from data centres to cloud-hosted services.
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