Australian Finance Group (AFG) has announced a $120 million takeover of rival mortgage aggregator Connective Group.
The acquisition will make AFG a mortgage distribution superpower with a total of 6575 brokers and a staggering $76 billion of the $198 billion of mortgages that settle each year.
AFG chair Tony Gill says: “The merged business will have a significant national footprint in Australia’s $1.8 trillion home loan market. The delivery of competition and choice to the Australian lending market is at the core of our strategy.”
Connective Group will receive $60 million in cash and nearly 31 million AFG shares valuing the acquisition at $120 million. AFG will be funding the cash component through a new corporate debt facility.
According to AFG, the transaction remains conditional upon the court’s validation of the transaction, shareholder approval and Australian Competition and Consumer Commission approval.
AFG chief executive David Bailey says: “Competition is at the heart of both businesses, with the non-major lenders representing 48 per cent of residential mortgage lodgements through AFG’s network in July 2019.
“Greater geographical portfolio diversification positions the merged group to further enhance choice and competition for consumers in all markets across Australia. Together with AFG’s existing growth plans, the opportunity presented by the sale process undertaken by Connective was absolutely aligned to our strategy.”
Connective has a total loan book of $144 billion and offers services across residential, commercial and asset finance and white label home loan products, under Connective Home Loans.
This offers the opportunity for AFG to grow its scale in both asset finance and commercial lending and following the acquisition, Connective brokers will gain access to AFG’s securitisation program and result in more lender and product opportunities for brokers.
Chief executive of Connective, Glenn Lees will be offered a position on the board of AFG on completion of acquisition.
Lees says: “The coming together of the Connective and AFG teams is a natural fit. We share a strong set of values with the priority to always work on behalf of our brokers.”
AFG will release its results later in the month and is expecting to report around $33 million in net profit and $31.3 billion in residential settlements.