- Finance provider CML Group (CGR) has seen its share price drop more than 40 per cent today after its proposed acquisition by Scottish Pacific Group was scrapped
- The scheme implementation deed (SID) for the proposed acquisition of CML was terminated by mutual agreement
- On April 24, 2020, Scottish Pacific issued a notice to CML outlining concerns that certain restrictions under the SID had allegedly been breached
- Subsequent discussions failed to yield an agreed path forward and, as such, the two parties have entered into a deed of termination and settlement
- Scottish Pacific will pay CML $1 million in recognition of the costs it incurred while pursuing the transaction and has agreed to a 12-month standstill on acquiring CML securities
- Today, the trading halt on CML securities — in place since April 2 — has been lifted, only to see the company’s share price fall 42.6 per cent to 29 cents per share
CML Group (CGR) shares have dropped more than 40 per cent after its proposed acquisition by Scottish Pacific Group was scrapped.
The scheme implementation deed (SID) would have seen Scottish Pacific acquire CML group, however, this has now been terminated by mutual agreement.
On April 24, 2020, Scottish Pacific issued a notice to CML outlining concerns that events having a materially adverse effect on CML’s business may have occurred and that certain restrictions under the SID had allegedly been breached.
Subsequent discussions failed to yield an agreed path forward and, as such, the two parties have entered into a deed of termination and settlement.
Scottish Pacific will pay CML $1 million in recognition of the costs it incurred while pursuing the transaction. It has also agreed to a 12-month standstill on acquiring CML securities or seeking to influence management without first gaining consent from CML.
Chairman Greg Riley said CML will push on with its strategy as an independent company.
“We are pleased to have avoided further expense and to have amicably resolved all matters and claims at issue between CML and ScotPac. We have made a difficult but pragmatic decision in the best interests of the company and its shareholders. We believe CML has a strong future as an independent company,” he said.
Business update
Additionally, CML has issued a business update today stating that within its Invoice Finance business there has been a 10.3 per cent increase in invoice volumes over the ten months until the end of April compared to the prior corresponding period.
This figure, however, includes the acquisition of Classic Funding Group in November. Excluding the acquisition, invoice volumes are down 2.4 per cent due to the impact of COVID-19 on existing clients.
Nevertheless, CML expects that once restrictions ease and businesses return to full capacity, invoices will too return to historical levels.
Meanwhile, the Equipment Finance business has a loan book of $104 million at the end of April which included $83 million from the Classic Funding Group which CML acquired, as well as $21 million from its own operations.
Additionally, approximately 10 per cent of clients have applied for hardship relief and CML has provided a three-month payment deferral. This equates to $100,000 per month in interest income which will be deferred to the end of each client’s contract.
CEO Daniel Riley said that CML is well-positioned to be able to support its clients through the current, trying economic conditions.
“Assuming business volumes remain at current subdued levels for the balance of the current financial year we anticipate the 2020 financial year EBITDA to be at similar levels to the 2019 financial year.”
“The increase in total loan book from equipment financing means that interest costs are expected to be approximately $3m higher in the 2020 financial year compared to the 2019 financial year,” he added.
CML securities were placed in a trading halt on April 24, when CML received the notice from Scottish Pacific. Today the trading halt was lifted and the company’s share price fell 42.6 per cent to 29 cents per share at 2:30 pm AEST.