Investment Matters

Company News: CML Group, Paladin Energy

CML Group announced it has entered an agreement to purchase 100% of the shares in Classic Funding Group (CFG) for $11m.

CFG is an equipment and invoice discounting business, with over 25 years’ experience.  The transaction will be funded by a new $25m facility and equity on CML’s balance sheet.  CML has conductive extensive diligence on CFG’s clients and has an intimate knowledge of its processes (having previously employed a senior executive of CFG Equipment Finance).

We view this as a sound, logical and value additive transaction that will grow the company.  It enables CML to not only further its position in invoice discounting and equipment financing, but also enables the expansion of its funding facilities.

Furthermore, we asses that there are considerable cost synergies and operational improvements to be realised in the combined entity, that will enable CML to extract further value from the acquisition.

 

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Paladin Energy announced it will be conducting an equity raising comprising an A$30.2m non-underwritten placement and a A$7m share purchase plan.  The raising will be conducted at a discount and will be used to fund the company’s ongoing working capital requirements.

When speaking to management, they expressed a belief that the timing of the raising is optimal.  They spoke of the decision as one that ensured an optimal outcome for existing shareholders.

However, we were disappointed with the timing of the raising and the company’s communication to existing shareholders.  We strongly question whether the transaction was required at this time and therefore will be value additive.  As such, we have decided to not participate in the raise and engaged with management and other stakeholders to further clarify management’s rationale.