Below are some notes from a call with Nathan Jacobsen following the announcement of the Centrepoint Alliance offer.
What do you see as the benefits of the deal?
Re-iterised strategy to become largest supplier to advisers etc.
Increased service offerings to advisers allows them to increase share of wallet from 6% to much higher
Revenue synergies between businesses. i.e. knowledge shop offered to centrepoint and centrepoint mortgage offered to diverger etc.
Thinks the combined business does ~20m of EBITA
What happens to Easton X assuming you get Centrepoint?
Didn’t ask
How do you intend to get financing for the deal?
On my numbers, assuming you use the 10m debt facility you have to it’s max, and considering current market conditions, Diverger will be left with >90m shares outstanding, or ~2.5x the current share count.
Nathan said the cash component all funded with existing cash, and an increased Westpac facility. Leaves them at 1.6x net debt/ebita post deal which he views as conservative, well within limits. They modelled in rate rises and everything o
Besides this, there is 3 shareholders they need to get approval from to get this through effectively
Thorney owns 26% - they already have support
Clearview owns 25% - in negotiation
Some major retail holders that own ~4% etc.
Dilution really hurts when your shares are priced at mid-high single digit PE multiples, put another way, diverger could give shareholders a teens dividend yield right now. Does this deal make more sense than that? It gives a great return and is much less effort + safer. Could focus on the more valuable organic growth
Won’t be paying more than the dividend they have. Just maintain it. Everything else goes to growth
Centrepoint has 50m+ revenue losses, made up of ~40/60 revenue and capital losses, how do you intend to utilise these?
Intend to use it when they can, need more tax advice. Losses are subject to fractioning, limiting the amount that can be utilised in any given year. That fraction gets ‘reset’ if this deal is made.
Fractioning relates to how many losses can be transferred from subsidiary to the consolidated group.
OTHER
Will be announcing an Equity investment in a firm IMMINENTLY – “I am literally in the process of reviewing it (announcement) as we speak”
Also is announcing a market update (Preliminary results) in 2-3 weeks with FY results