He took aim at Humm’s board again on Monday, noting it had taken a week to get the chairman’s approval to buy shares.
“Increasing my stake in Humm Group confirms that I’m prepared to put my money where my mouth is when it comes to my belief in this company – and its value,” Mr Abercrombie said.
“The sale proposal now before shareholders significantly undervalues the business and would leave shareholders with Latitude shares, which have fallen in price since the announcement. These are the key reasons why I continue to oppose the sale.”
Tamim Asset Management’s head of Australian equity strategies, Ron Shamgar said last week he intends to vote against the Latitude offer. He represents about 2 per cent of Humm’s share register and said he had spoken to investors who constitute another 8 per cent to 10 per cent who expressed reservations about the deal.
Latitude is offering $35 million in cash and 150 million in shares to purchase Humm’s consumer finance assets, which include its buy now pay later businesses Bundll, Humm, Humm90 and HummPro. Humm would remain listed and keep its commercial finance arm called Flexicommercial, a business Mr Abercrombie founded, after the sale.
Mr Abercrombie argued the terms of the sale are skewed too far in Latitude’s favour.
“This transaction is expected to deliver 22 per cent of Latitude’s financial year 2023 earnings of $355 million, but Humm shareholders are only offered 13 per cent in the combined group,” Mr Abercrombie said.
“As part of the deal, Latitude is getting $106 million of our own cash on our balance sheet – money that, as a shareholder, you already have an interest in prior to the sale! However, Humm shareholders will only receive a paltry $35 million in cash or 7¢ a share, with the rest of the purchase price being paid in Latitude shares. How is this fair?”
Humm’s board, led by chairman Christine Christian, have argued that the rout plaguing the buy now pay later sector makes the deal, which comes in the absence of a superior offer, an attractive one for shareholders.
But Mr Abercrombie’s letter argued that the board had not conducted a public auction.
“The best way to maximise the price… is to ensure that all potential bidders are included in a transparent process,” he said.
“As Humm’s largest shareholder, your and my interests are aligned, and I don’t believe that the offer on the table today, is anywhere near the best price that Latitude or any other bidder would be prepared to pay for [the consumer finance assets] if the board had conducted a public auction sale process for this global business.”
The board responded saying it is incumbent on Mr Abercrombie to find a higher offer or outline his plans to take on the deteriorating macroeconomic environment, describing Humm shareholders as “long-suffering”.
“It is incumbent upon Mr Abercrombie to outline his plan to his fellow, long-suffering shareholders so that they can make a fully informed decision,” he said.
Non-executive John Wylie is Humm’s second-biggest shareholder after Mr Abercrombie, with about a 5 per cent stake purchased via a placement at the height of the market’s excitement about the buy now pay later sector for $1.25 a share through his Tanarra Capital investment vehicle in 2019.
Tanarra subscribed for its full entitlements in a 2020 raising and Mr Wylie is understood to own a further 2 per cent of Humm’s equity through a family trust.
Shares in Humm closed at 81¢ on Monday.