Australian Finance Group Ltd. · ASX:AFG
Australian Finance — Merger or Acquisition (August 2019)
16 slides from Australian Finance's merger presentation, Aug 12, 2019
Slide 1: Merger with Connective
Merger with Connective Investor Presentation AFG continuing to drive competition and choice
Slide 2: Disclaimer
2019 Disclaimer This presentation has been prepared by Australian Finance Group Ltd (AFG) for information purposes only. This presentation is not a product disclosure statement or prospectus for the purposes of the Corporations Act 2001 (Cth), nor does it constitute financial product or investment a
Slide 3: Transaction/merger rationale (1 of 2)
2019 Transaction/merger rationale (1 of 2) • AFG to merge with the aggregation business of Connective Group in a transaction that values Connective at $120 Significant million on a cash-free, debt-free basis national mortgage • Transaction consideration implies a pro forma unaudited reported FY19 PE
Slide 4: Transaction/merger rationale (2 of 2)
2019 Transaction/merger rationale (2 of 2) • Connective Group shareholders will receive $60 million in cash and 30.9 million AFG shares Consideration • AFG shares to be issued at $1.9426/share, being the 10-day VWAP up to and including 9 August 2019 • Cash consideration funded through a new debt fac
Slide 5: Key terms of the transaction
2019 Key terms of the transaction Transaction • AFG will acquire substantially all the assets and liabilities of Connective Group structure • The transaction is structured so that it will proceed as an asset sale but can proceed as a share sale in certain circumstances and where the parties agree Pu
Slide 6: Who is Connective?
2019 Who is Connective? Connective has a network of 3,600+ brokers, Pro forma FY19 underlying and offering services across residential, commercial and 128 Full-time Employees reported NPAT of $9.4m2,4 and asset finance and its own range of white label home 5 Offices (HQ in Melbourne) $10.9m4,6 respe
Slide 7: Merged group – key metrics
2019 Merged group – key metrics Residential Settlements1 Broker Network2 FY19 Revenue1,4 AFG Connective revenue lower due to Connective – predominantly flat Fixed Fee fee revenue model Model where 100% of Connective – $70bn 6,575+ $706m commissions are Commission paid out to brokers Structure Model
Slide 8: Executing on AFG’s earnings diversification strategy
2019 Executing on AFG’s earnings diversification strategy The Connective transaction is consistent with our long-term strategy, significantly grows the distribution network and allows AFG to increase the penetration of products such as AFG Securities, white label products and the AFG Business Platfo
Slide 9: Complementary strategic fit at the product and broker level
2019 Complementary strategic fit at the product and broker level • Provides exposure to an alternative mortgage broker aggregation model with strong ongoing brand recognition • Access to a larger distribution channel with key white label and securitisation products under-penetrated relative to AFG’s
Slide 10: Two brands – one vision
2019 Two brands – one vision AFG and Connective will remain as two brands in the market place with clearly differentiated value propositions + Distribution 2,975+ brokers 3,600+ brokers ü A significant national broker distribution network to network drive greater competition in the home loan market
Slide 11: Merged group – distribution network
2019 Merged group – distribution network New South Wales Victoria Queensland Western Australia 2,265+ 1,840+ 1,185+ 920+ South Australia • Combined national distribution network of 6,575+ brokers as at 30 June 2019 • Larger network to continue to deliver earnings diversification • Greater choice for
Slide 12: Revenue opportunities
2019 Revenue opportunities • Potential to increase volumes across: • Connective Home Loans: Increased penetration of existing network through shared products and expertise of Merged Group • AFGS: Distribution of AFG securitised products through Connective network • Higher margin AFG Business technol
Slide 13: Earnings growth / maintaining a conservative balance sheet
2019 Earnings growth / maintaining a conservative balance sheet • On an unaudited pro forma basis, the combined business • Transaction funding supported by a major Australian bank would have FY19 reported NPAT of ~ $44 million1 and underlying NPAT of ~ $38 million1 • Credit approved term sheet obtai
Slide 14: Merger to create long-term value for AFG shareholders
2019 Merger to create long-term value for AFG shareholders • A significant national broker distribution network to drive greater competition in the home loan market • Both businesses are culturally aligned and highly complementary at the strategic and operational levels • Expected to be EPS accretiv
Slide 15: Q&A
AFG Q&A
Slide 16: Appendix – Key Connective Executive Biographies
2019 Appendix 1 – Key Connective Executive Biographies Glenn Lees Mark Haron Glenn Lees is a director and CEO of the Connective Group. He Mark was appointed Executive Director of Connective in 2006, started his career in the mortgage broking industry in 2000, having previously been the CEO at aggreg
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