Diverger has confirmed a rival bidder with the claim of a “superior offer” has put forward a competing proposal for acquisition.
In an ASX statement, Diverger confirmed recent media speculation that it has received a non-binding indicative proposal from COG Financial Services Limited to acquire 100 per cent of the firm.
The news comes just over a month after Count announced it has entered into a scheme of arrangement with Diverger in a $45.3 million deal expected to be completed in February 2024.
According to COG, the strategic rationale for the transition is that there are “many revenue and expense synergies and growth opportunities” across COG’s asset finance broking, novated leasing, and funds management activities, and Diverger’s operating businesses.
In its proposal, COG recognised a scheme of arrangement process had already commenced with Count Limited however it described its transaction as a “superior offer.”
COG’s indicative proposal price implies an equity value of $56 million for Diverger.
It proposes to acquire all of the Diverger shares on issue for $1.4083 per share with $0.679 in cash per Diverger share (48 per cent) and $0.731 in COG shares (52 per cent.
“The indicative proposal price represents a 32 per cent premium to the current share price of A$1.07 per share and a premium of 38 per cent over the 30 day VWAP (A$1.01387) and therefore, represents compelling value for the holders of Diverger shares,” COG stated.
“In addition, COG is prepared to re-imburse Diverge for the break free payable to Count on terminating the current scheme. It is also prepared to accept a liquidated damages liability in any future scheme should COG withdraw from the transaction for any reason.”
COG’s proposal notes it is offering $27 million cash, an increase of some 83 per cent over the Count offer.
However, Diverger has said the proposal is not currently regarded by the board as a superior proposal.
The firm stated: “The Diverger board is working through the COG proposal and to date has not made any recommendation in relation to the proposal.
“The board has not changed their unanimous recommendation in favour of the current scheme proposal with Count.”
Diverger’s major shareholder, HUB24, has backed the Count transaction and intends to vote in favour of the scheme in the absence of a superior proposal.
Count has 379 financial advisers while Diverger represents 146 financial planning firms and 603 licensed advisers as well as working with 3,000 accounting practices.
The planned acquisition of Diverger by Count would create the third-largest licensee in Australia.
Earlier this month, a Diverger shareholder termed the proposed merger with Count a “farcical” transaction, saying the offer price does not reflect the fair value of Diverger.
In an update, DMX Asset Management, which has invested in Diverger since 2017 and holds a 5.2 per cent stake, said the firm has demonstrated strong growth and significant profit uplift during that time, although its share price has underperformed.
Over five years, shares in Diverger have risen 23 per cent compared to 18.5 per cent by the ASX 200 over the same period.
“Given the disconnect between value and share price, we consider any reference to the historical Diverger share price in the context of determining fair value is effectively redundant.
“Based on publicly disclosed FY25 earnings targets, the combined Count/Diverger business is expected to be more expensive (5x EBITA) than Diverger on a standalone basis (3.6x -4.3x EBITA), even after the merged business benefits from $3 million of synergies (which will cost $8 million to deliver).
“While there are other benefits to the acquisition (improved liquidity, larger more diversified company), we struggle to see the value basis of this transaction from the perspective of Diverger shareholders.”
