Five years after hitting the ASX with a $610 million market cap, small business lender Prospa is delisting with a $74m takeover bid

- February 27, 2024 2 MIN READ
Prospa co-founders Greg Moshal and Beau Bertoli
Small business lender will disappear from the ASX within months following a $74 million takeover bid from the Melbourne-based Salter Brothers Tech Fund.

While the offer of $0.45 cents a share is a 22% premium on Prospa’s (ASX:PGL) closing price of $0.37 cents on Monday, it’s a far cry from when the business listed at $3.78 in June 2019.

At the time the IPO was a windfall for backers including AirTree, Square Peg, UK VC Entree Capital, and AustralianSuper, the fintech is now worth about 10% of the $719 million it was worth on its opening day of trade, having raised an extra $110 million from investors for the float.

Existing shareholders will have the options of cashing out at $0.45 cents or rolling over their shares for new scrip in PGL HoldCo Ltd.

The offer represents a 36% premium to Prospa’s six-month VWAP (volume-weighted average price) of $0.33 per share.

The takeover deal has been backed unanimously by an independent board committee (IBC) led by Prospa chair Gail Pemberton, but remains subject to shareholder approval.

“Subject to no Superior Proposal emerging and the Independent Expert concluding, and continuing to conclude, that the transaction is in the best interests of Prospa Shareholders, the IBC recommends that they vote in favour of the Scheme,” she said.

“FFor those shareholders seeking liquidity, the IBC notes that the Cash Consideration payable under the Scheme delivers certainty of value to Prospa Shareholders in what has been an otherwise illiquid market for Prospa Shares.”

Prospa will become the founding investment of the Salter Brothers Tech fund, which aims to back fintech, proptech, enterprise software, telecommunications and medical, health and sports tech, with a target gross internal rate of return of 15% on a five year term.

As part of the takeover, Prospa has struck a deal with its lender iPartners to on-lend up to $12 million to the Salter Brothers consortium in order to fund part of the cash consideration, although that arrangement is also subject to approval by a special resolution of Prospa shareholders.

The announcement came as Prospa released its half-yearly results, with total loan originations falling 27.4% on 12 months ago to $308.3 million. The company said the drop reflected the deliberate tightening of credit settings.

Closing gross loans have reduced to $807.4 million in December 2023, down 5.6% on a year ago. Statutory profit before tax for the half increased to $9 million, compared to a $6.3 million loss in H1 FY23.

Net bad debts remained elevated at $53.7 million (H2 FY23: $54.0 million) and increased to 12.9% (annualised) of average gross loans.

EBITDA, excluding the non-cash expected credit loss provision release of $17.5 million, was a $3.8 million loss compared to a $29.8 million profit in H1 FY23.