ThinkSmart Limited (AIM: TSL), a leading digital payment solutions provider, announces that it has sold 90% of the share capital of ClearPay to AfterPay Touch Group Limited (“AfterPay’’), a company listed on the ASX.
ClearPay, a company which commenced trading in July 2017 and formally launched in March 2018, allows retailers to offer their customers the ability at the point of sale to make purchases of up to £450 and spread the cost over three interest-free monthly payments.
The Company’s subsidiary, ThinkSmart Europe Limited (“TSE”), has sold 90% of the issued shares in ClearPay to AfterPay for 1,000,000 shares in the capital of AfterPay (currently valued at AUD $18.55m) (“Consideration Shares”) to be issued to TSE. An initial tranche of 750,000 shares will be issued to TSE at completion on 23 August 2018 (am AEST) and a second tranche of 250,000 shares will be issued to TSE on 23 February 2019, being 6 months from completion.
AfterPay are acquiring the ClearPay corporate entity, including ClearPay's contracts with relevant service providers and key employees with local knowledge of the UK market and regulatory landscape. ClearPay’s existing retailers and customers currently transacting on ClearPay’s system will be afforded the opportunity to transition onto AfterPay’s global platform upon launch, expected to be within the next 6 months.
Utilising the local capabilities of the ClearPay entity and team, Afterpay will prepare to launch its globally scalable system into the UK within the next 6 months and will immediately engage with relevant retailers with a local UK presence.
The Company’s subsidiary, RentSmart Limited has entered into a business separation and transitional services agreement with ClearPay to support the transaction and facilitate the transition to AfterPay.
A proportion of the 10% shareholding in ClearPay retained by TSE will be made available to employees of ClearPay under an employee share ownership plan (“ESOP”). After completion, TSE will make available some of the shares in ClearPay held by it for the grant of options under the ESOP (up to 3.5% of the total share capital of ClearPay). Any such options will only be exercisable on an ultimate exit event or at such time as TSE no longer holds shares in ClearPay.
TSE also has rights of pre-emption to subscribe for shares in ClearPay in any follow on fundraise. Afterpay has an option to acquire the remaining shares held by TSE (and any shares forming part of the ESOP), exercisable any time after 5 years from Completion based on agreed valuation principles. If the option to purchase is not exercised by AfterPay within 5 years and 6 months from Completion then TSE may exercise a put option to sell the remaining shares in ClearPay held by it (and any shares forming part of the ESOP) to AfterPay at a price calculated on agreed valuation principles.
The Company is also a party to the sale and purchase agreement and is guaranteeing the obligations of TSE under that agreement. For the 12 month period to 30 June 2018 ClearPay incurred unaudited losses of £0.6m and at 30 June 2018 had unaudited balance sheet net assets of £1.4m (excluding inter-company debt).
As part of the transaction AfterPay will ensure that the Consideration Shares are listed on the ASX. It is TSE’s current intention to dispose of the initial tranche of Consideration Shares over the medium term in an orderly manner whilst retaining an ongoing investment in AfterPay. It is expected that shareholders will be rewarded in the form of a special dividend and capital return whilst the business will ensure that it retains sufficient cash reserves for further expansion and product development opportunities.
The business intends to advise shareholders at their full year results in mid-September of the detail of the return.
The Group will continue to operate its existing core credit and leasing business, and to invest in its proprietary leading digital payments solution SmartCheck.
Commenting, Ned Montarello, ThinkSmart’s Executive Chairman, said: “The Board is pleased to crystallize a significant return on investment for shareholders with the sale of 90% of ClearPay, while still retaining an ongoing investment in what, in our view is the leading player in this sector globally, having recently successfully entered the US market.
AfterPay’s product, ongoing success and go to market strategy is compelling and we are delighted to now be a part of this story.
In a market three times the size of Australia the acquisition of ClearPay will assist AfterPay in becoming the dominant player in the UK market with the potential for significant growth over the next five years.”