Firstfolio to acquire $6B in assets
Firstfolio has commenced due diligence to acquire finance company, First Chartered Capital's (FCC) $3.5 billion loan book, wholesale mortgage manager, Loan Services Australia's $2 billion mortgage managed loan book and boutique mortgage manager, Xplore Capital's $400 million mortgage managed book.
The acquisitions, if completed, will see Firstfolio's loan book approach $18 billion and consolidates Firstfolio's position as one of Australia's leading independent mortgage services companies.
Firstfolio Chief Executive, Mark Forsyth, said "Each acquisition will strengthen the company's three primary areas of focus including wholesale mortgage distribution, ongoing geographic expansion and developing new avenues of distribution.
"To expand the company's loan portfolio we are looking at opportunities where funders are reducing the number of lenders on their panels, to acquire profitable mortgage operations that will add economies of scale to our loan portfolio, and strengthen underlying earnings.
"Our organic growth strategy, in addition to our traditional realms of mortgage operations also involves establishing exclusive mortgage and financial services arrangements with leading brands, such as the AV Jennings deal recently announced.
"The First Chartered Capital transaction will offer Firstfolio the opportunity to acquire a 35 franchised retail distribution network, while the Xplore acquisition offers exclusive access to the Amway network in Australia," said Mr Forsyth.
"We have already begun to see traction from the company's growth strategy, reflected in the strong earnings turnaround for FY 2009, and we expect these conditions to continue to flow into 2010," added Mr Forsyth.
The combined consideration for all three acquisitions involves upfront payments of $15 million in cash, five million shares and an estimated $5 million in deferred payments tied to agreed performance metrics.
The Firstfolio Board has secured a long term $25 million funding facility to fund its further growth, with Welas Pty Ltd ('Welas'), a company associated with Firstfolio non-executive director, Tony Wales.
The proposed acquisitions will be earnings accretive with up to $4m in additional EBITDA expected to be delivered in the 2010 calendar year. A clearer picture regarding the impact on earnings will be available on successful completion of the proposed acquisitions when all the transaction and integration costs are available.
Following the acquisitions of eChoice and Domain Financial Services in 2008, Firstfolio reported EBITDA at the top end of guidance of $5.39 million for FY 2009.
The company has provided FY 2010 EBITDA guidance in the range of $10 to $11 million.