- Option to acquire remaining 49.9% interest
Manx Financial Group PLC announces that Manx Ventures Limited (“Manx Ventures”), a wholly owned subsidiary of the Company, has agreed to acquire a 50.1% interest (the “Acquisition”) in UK focused, point of sale lender Payment Assist Limited (“Payment Assist”) for a total initial consideration of £4 million payable in cash. The Company has been working with Payment Assist since 2015, the Company’s wholly owned subsidiary Conister Bank Limited (the Isle of Man’s only independent bank) having provided the primary wholesale funding agreement to support Payment Assist’s growth during this period. The Acquisition is conditional on the satisfaction of certain conditions precedent including approval of the change of control by the Financial Conduct Authority (“FCA”). In addition to the Acquisition, Manx Ventures has agreed an option to acquire the remaining 49.9% of Payment Assist for cash consideration of up to £5 million (the “Option”). The Option can be exercised by Manx Ventures at any time for a period of two years after publication by Payment Assist of its audited accounts for the period to 31 December 2024. MFG will fund the initial £4 million consideration and deferred consideration of up to £5 million from its cash resources.
Commenting on the Acquisition, Douglas Grant, CEO of the Company commented: “The joint venture with Payment Assist continues our strategy of acquiring interests in high quality specialist lenders. We have witnessed first-hand the growth of Payment Assist over the last 7 years and the Board believes that there is potential for significant further growth. The Acquisition, with no dilution to shareholders or external funding required, will position the Company to capitalise on what we expect to be a high margin and profitable business now and in the future. The option positions the Company to acquire the remaining 49.9% of Payment Assist at an attractive valuation if the business grows as the Company expects over the next three years. We have started the process of engaging with the FCA to obtain their approval for the proposed change of control and will make an announcement to update the market once this is received.”
Neil Jeffery, Chief Executive Officer of Payment Assist commented: “I am delighted to secure a long-term partnership with the Manx Financial Group, We have worked well with Conister Bank over the last 7 years and are confident the partnership with Manx Ventures, and continued support from Conister Bank as we grow the business, will position Payment Assist to continue to be a leading point of sale lender in the UK and support our growth into new products and sectors.”
Ø Payment Assist, the UK’s leading automotive repair point-of-sale finance provider, working with premier national chains such as National Tyres, Halfords and Formula One
Ø Payment Assist has now diversified lending into insured products and retail
Ø Payment Assist loan book of £21.3 million as at 31 December 2021, an increase of 72% since 2019
Ø Payment Assist achieved revenue of £6.6 million in the 12 months to 31 December 2021, an increase of 69% since 2019
Ø Payment Assist EBITDA of £2.5 million for the period to 31 December 2021, an increase of 108% since 2019
Ø Payment Assist provided finance for over 170,000 customers in the 12 months to 31 December 2021, an increase of 43% since 2019
Ø Transaction structure means no dilution to Company’s shareholders; acquisition financed from Company’s available cash and debt
Ø Payment Assist management team retain 49.9% interest in business
Ø Option exercise price of up to £5 million sets an attractive acquisition price should Payment Assist continue to grow with the support of the Group
Key Terms of Acquisition
On 13 May 2022 Manx Ventures and the current shareholders of Payment Assist (the “Vendors”) being Neil Jeffrey, Colin Ellard, Spencer Wrench and Simon Bevan signed a sale and purchase agreement (the “Purchase Agreement”) pursuant to which, subject to satisfaction of certain conditions precedent as further detailed below, Manx Ventures agreed to acquire 50.1% of the issued ordinary shares of Payment Assist (“Sale Shares”) for total cash consideration of £4 million (the “Consideration”). In particular, £2 million of the Consideration is payable by the Company within five business days of finalising completion accounts to the date of completion of the Acquisition (the “Completion Date”), with the balance of £2 million payable after publication of the Payment Assist audited accounts for the period to 31 December 2022. The Consideration is subject to adjustment in accordance with the Purchase Agreement, with Payment Assist to be acquired on a cash-free/debt-free basis with completion accounts finalised within 105 days of the Completion Date.
The Acquisition is subject to customary conditions precedent to closing, including most significantly, approval of the change of control following the Acquisition by the FCA and other regulators of the Company. The parties have agreed a long-stop date of 31 December 2022 for satisfaction (of conditions precedent, failing which, unless agreed otherwise, the rights and obligations of the parties under the Purchase Agreement shall lapse).
In the period between exchange of the Purchase Agreement on 13 May 2022 and the Completion Date, the Vendors and Payment Assist have agreed to certain covenants to ensure the Company continues to be operated in the ordinary course, and restricting the right of the Vendors to transfer or otherwise encumber their shares. Manx Ventures has the right to terminate the Purchase Agreement in the event of a material adverse change to the business of Payment Assist in the period prior to the Completion Date. The Vendors will provide Manx Ventures with customary warranties regarding the business and affairs of Payment Assist, with warranties to be confirmed on 30 June 2022 and each day thereafter up to and including the Completion Date.
Key Terms of Joint Venture Agreement
From the Completion Date, the parties shall be joint venture partners, with the Vendors retaining a 49.9% interest in the issued shares of Payment Assist. On Completion, the parties will execute an agreed form of joint venture agreement (the “JV Agreement”), setting out the rights of the parties as shareholders of the Company. In particular, following Completion, Manx Ventures shall have the right to appoint a majority of directors to the board of Payment Assist. Neil Jeffery (the current CEO of Payment Assist) and Colin Ellard (the current COO of Payment Assist) will remain as directors of Payment Assist and will continue to operate the business on a day-to-day basis following completion of the Acquisition. The JV Agreement provides certain customary protections for the Vendors as minority shareholders of the Company, including in relation to future dilution and the related party transactions.
Key Terms of the Option Agreement
On Completion, Manx Ventures and the Vendors will execute an option agreement (the “Option Agreement”) pursuant to which the Vendors grant to Manx Ventures the right to acquire the balance of 49.9% of Payment Assist’s issued shares (held by the Vendors) (the “Option Shares”) for consideration of up to £5 million. The Option can be exercised by Manx Ventures at any time for a period of two years after publication by Payment Assist of its audited accounts for the period to 31 December 2024, with the exercise price for the Option Shares based on an enterprise value for Payment Assist on exercise of the Option equal to two times the average net profits of Payment Assist in the three financial years ending on 31 December 2024 (the “Option Period”), subject to a cap of £5 million. In the event Mr Jeffery and/or Mr Ellard cease to be employed by Payment Assist at any time during the Option Period, other than in circumstances where they are a “good leaver”, the Company shall have the right to bring forward the date on which the Company can exercise the Option in respect of the shares held by the relevant individual.
About Payment Assist
Payment Assist was set up by Neil Jeffery and Colin Ellard in 2013 when they saw an opportunity in the automotive sector to try and improve garage customer retention rates by providing a financial solution to customers who could not immediately afford to pay for all the work that was required to be completed on their vehicle.
Payment Assist was granted its FCA permission in October 2014.
The opportunity to finance wills and trusts over longer periods was then discussed with some longstanding contacts. Payment Assist agreed to offer this facility initially on a trial basis, which has been successful and was successfully expanded.
The broader retail market is one that Payment Assist are moving into, in association with a number of key contacts within the industry; building on their success seen in the automotive sector.
Further details regarding the business and operations of Payment Assist, and its lending terms and policies, can be found at its website, https://www.payment-assist.co.uk
For the year ended December 2021, after all expenses, Payment Assist reported an unaudited profit on ordinary activities of £1.1 million and had as at that date net assets of £4.5 million. The results of Payment Assist will be consolidated with those of the Company from Completion.