Thinktank confirmed it is talking to investors for a potential sale.
News broke last Friday that the non-bank lender, which is partially owned by Australian Finance Group Limited (AFG), has gone to market, with the help of investment bank UBS, for a potential sale.
"Thinktank regularly works with a range of advisors and funding partners as part of managing its balance sheet, capital allocation initiatives and funding activities in support of the ongoing growth of the business," Thinktank Chief Executive Officer and Co-founder Jonathan Street, confirmed in an email to Australian Broker. "As part of this broader capital management activity, the company is currently assessing interest from potential investors. The primary objective of this process is to facilitate a liquidity event for a number of long-term minority shareholders, some of whom have supported the business since its establishment in 2006.
"Additionally, Thinktank may benefit from the introduction of a new shareholder whose capital, expertise and relationships could support the company's future growth ambitions," Street continued.
Sydney-headquartered Thinktank is a property finance lender serving the commercial and residential markets through the mortgage broker channel. The firm originates commercial and residential property loans exclusively via mortgage brokers, with a particular focus on self-employed borrowers, small and medium-sized enterprises, property investors and self-managed superannuation funds (SMSFs).
In 2018, AFG acquired a 30.4% stake in the business and two board seats for $10.9 million. Since then AFG's ownership has increased to 32%. The transaction also allowed AFG to offer white label commercial property lending Thinktank products through its broker network.
"It was a great strategy," said a source familiar, who agreed to talk on the condition of anonymity. "All the brokers at Connective or Loan Market, or wherever, if they sell a Thinktank product, AFG would make money. And that strategy works. Thinktank has gone from strength to strength."
Since then, Thinktank’s value has continued to rise, both as a standalone business and as part of AFG. In AFG’s latest full-year results, Thinktank contributed $3.6 million to the aggregator’s earnings growth. The lender’s assets under management (AUM) climbed to $9.6 billion, while full-year loan originations reached $5.2 billion and net profit after tax came in at $19.2 million.
The figures inevitably raise the question of why AFG isn’t seeking to take full ownership of Thinktank.
In a statement to Australian Broker, AFG said: "As a minority shareholder in Thinktank, AFG does not comment on the strategic or commercial matters of associated entities, including any processes they may be undertaking. AFG will continue to meet its continuous disclosure obligations and will update the market via the ASX should any material information arise in relation to its investment in Thinktank. AFG has no further comment at this stage."
Street confirmed that talks remain at an early stage, with no transaction agreed or finalised to date.
"We will consider any proposals that may emerge from the process in the best interests of the company and its shareholders," he said. "Importantly, this process does not change our day-to-day operations, strategic priorities or commitment to our customers, brokers, distribution relationships, funding partners and members of our team."
Street added to Australian Broker: "Thinktank does not comment on the position or intentions of individual shareholders, or on discussions with existing or potential investors. Any proposals that emerge from the process will be considered in the best interests of Thinktank and its shareholders."
But market players are left to wonder whether Thinktank is simply testing the market to see what it might be worth.
"I think Thinktank was trying to get the best price," the source said. "Thinktank could genuinely be just trying to drive the price up, because they want to get as much as they can.
“The other interesting part of this transaction is, because Thinktank products sit on a lot of other aggregators, those other aggregators might get very uncomfortable if their business partner is AFG and AFG gets access," the source continued. "So it'll depend on who the buyer is; it'll depend on the price. And it'll depend on the clauses that both those parties agreed to when they took the 30%.
"But it just goes to say that the Thinktank guys have done a great job," the source added. "From where they started, when AFG invested in them, to where they are today, I would say it's been a good investment for AFG, and I'd say it's been really good for Thinktank. It's a success story."
