Humm, Latitude walk away from BNPL sale

The sale of Humm’s buy now, pay later (BNPL) business to consumer finance outfit Latitude has been abandoned, with both parties attributing the termination of the deal to major disruption in the financial markets.

In statements released to the ASX on Friday morning, the companies said they had mutually agreed to abandon the proposed sale of Humm’s consumer finance arm to Latitude Financial, causing Humm’s share price to drop almost 14 per cent in early trade. Humm was trading at 48 cents in afternoon trading, while Latitude was flat at $1.40 a share.

Humm, formerly known as Flexigroup, earlier this year agreed to sell its consumer finance business to Ahmed Fahour-led Latitude for $335 million, in a deal that would ramp up Latitude’s push into the BNPL sector, while leaving ASX-listed Humm as a commercial finance business.

The dissolution of the deal comes as the viability of stand-alone BNPL businesses comes under intense scrutiny, with analysts concerned about the sector’s rising bad debts and losses. With instalment payments being increasingly offered as a feature by established operators like banks, PayPal and Apple, BNPL operators are chasing mergers to grow their customer bases.

The proposed deal between Humm and Latitude was particularly controversial, drawing strong criticism from Humm’s founder and major shareholder Andrew Abercrombie, who labelled it a “garage sale” amid a campaign to shareholders to reject the sale.

On Friday morning, he said: “From the very start, this deal undervalued [Humm Consumer Finance]. I look forward to maximising the full value of Humm for shareholders, our customers and our people.

“The terminated deal has inhibited progress for HCF but also produced some positive outcomes. I ask shareholders for patience and am confident this company has a bright future.”

In a trading update to the ASX on Thursday, the Humm board said that cash net profit after tax for its consumer finance arm was down 60 per cent compared to the corresponding period, while the commercial side of the business continued to grow strongly.

“The trading environment is very tough for HCF, with intense competition, rising interest rates, and weakening consumer sentiment. HCF has experienced a reduction in net receivables, net yield compression and higher expenses,” they said in a statement.