Frontier to establish giant receivables business
FOR IMMEDIATE RELEASE
Frontier to establish giant
receivables management business
SYDNEY 5 pm 27 April 2000 – Frontier Petroleum (ASX: FRO) today announced that it has entered into an agreement to acquire what will be Australasia’s largest receivables management company.
Under the agreement, and subject to Frontier shareholder approval, a $A100 million ($NZ120 million) business will be established when Frontier acquires the assets and business interests of Receivables Management Limited (RML) and a number of associated companies in Australia and New Zealand.
Consideration will be for a total price of $A80 ($NZ96) million paid by the issue of approximately 300 million Frontier ordinary shares at a value of $A0.20 ($NZ0.24) each and $A20 ($NZ24) million in cash. Post acquisition of RML and the associated companies, and subject to shareholder approval, Frontier will change its name to RMG Limited.
On completion of the transaction a total of approximately 475 million shares in RMG will be on issue and will trade on both ASX and NZSE.
The acquisition is subject to a number of conditions including due diligence and the raising of $A25 million ($NZ30 million) via a placement of shares.
RMG will not only be Australasia’s largest receivables management company, it will be the first company operating on both sides of the Tasman to offer an integrated range of receivables, debt management and credit reporting services under a single umbrella.
Clients who have traditionally had to deal with several agencies will now be able to obtain a full range of services from one company. Services will include traditional debt recovery and receivables management, credit information services together with database management, debt purchasing, factoring, ledger management and even complete outsourcing of a company’s receivables function by deploying leading edge internet-enabled technology.
Once the transaction is complete, Cullen Investments Limited, which is one of the vendors of Receivables Management Ltd, will hold approximately 27% of the shares in RMG. This will include an indirect interest held through its 60% shareholding in Eldercare New Zealand Ltd (NZSE: ELD), which is currently a substantial shareholder in Frontier.
Cullen, the private company of New Zealand based investor Eric Watson, also has a 9% interest in Strathmore Group Ltd (NZSE: SMR), which converts its 43.6% shareholding in CreditNet to shares in RMG as part of the transaction.
Commenting on the announcement, Frontier CEO, John Tarrant, said that the target date for concluding the transaction was June 2000. He also announced that the chief executive of RMG will be Mr Paul Cooney, a 30 year veteran of the industry and current national president of the Australian Collectors Association.
“Historically, the receivables management industry has been fragmented, comprising many small players offering a limited range of products and services,” Mr Cooney said.
“RMG will have the mass, resources and capabilities, unique information and intellectual property sufficient to meet all client service requirements under the one roof. We believe we will be able to lead the industry in meeting the expected demand from both the public and private sectors for outsourcing the management of a range of functions such as ledger management, debt purchasing and a variety of other services including credit information,” he added.
“Larger full-service receivables management companies, on which RMG is modeled, have been the norm for some time in the United States and Europe. This merger will create a real choice for companies looking for world class standards in systems and results. And by leveraging the intellectual capital that already exists in some of the constituent companies, we will be able to deploy new generation Internet-enabled technology to deliver its services to customers in Australia and/or New Zealand."
Post transaction, existing shareholders of FPL will hold 19% of shares of the new company and shareholders of the merging companies will hold 64% with 17% held as result of a private placement of shares.
Gross revenue in the year twelve months ending 30 June 2001 is expected to be A$57.5 million (NZ$69 million, representing a market share of 20% of the combined Australian and New Zealand markets of A$280 (NZ$335) million. The growth potential of new services such as debtor ledger management, debt management and debt purchasing mean that the combined market is expected to reach A$500 (NZ$600) million within two years. Based in the capabilities of the new company, RMG believes it can capture at least 20% of this.
Additional growth is also expected to come from the region’s A$100 (NZ$120) million credit information market, which RMG will be well positioned to develop. A new part of RMG’s service offering will be commercial credit reporting services. Consumer credit checking capabilities in Australia and New Zealand will also be provided through a new RMG-owned company, CreditNet International Limited, which will lead the development of a new regional information service.
Mr Cooney said the new operation’s receivables division, trading as Receivables Management Limited in Australia and Receivables Management (NZ) Limited, will have an international network of 21 of its own offices in Australia, New Zealand and Malaysia, and global reach through strategic partnerships.
“The first of these alliances, announced recently in the US, is with the world’s largest receivables management company, NCO Group Inc (NCO), of the United States, he said. “The alliance will allow RMG to provide services for NCO’s clients throughout Australasia, including Malaysia, Hong Kong, Singapore and China. In return, NCO will provide services for RMG clients in the United States and Canada.”
Joining Mr Cooney in managing the operating company, Receivables Management Limited (RML) will be Mr Wayne Slack from Laurens & Co, who will have responsibility for sales and marketing; Mr Bill Duncan from Receivables Management (NSW), for business support and development; and Mr David Ellis from CSA Mercantile, for e-commerce and information technology.
Executives from the merging companies will also take on senior management roles within RML. Mr Kevin Hollister will assume the position of state manager in South Australia, Mr Keith John will be state manager Western Australia, Mr Terry Clee sales manager New South Wales and Mr Ian Coates, special sales manager. Mr Bob Garters and Mr Stuart Christie will take the senior management roles in New Zealand.
Australian companies merging in RMG Ltd
AMBA (Australian Mercantile Bureau and Agency); Atlas Collections and Compass Collections (collectively known as Commercial Debt Collection Service); Commander Credit and Collections; CSA Mercantile; Laurens & Co; Pioneer Credit Management Services; Procol; and Receivables Management (NSW) and Receivables Management (Vic).
Zealand companies are:
Canterbury Credit Consultants; College Credit Management; Creditnet International; Debtor Management (NZ); Northern Credit Consultants; and Otago Credit Consultants.
The new company will have offices in all major centres in Australia and New Zealand including Sydney, Melbourne, Perth, Brisbane, Adelaide, Auckland, Wellington and Christchurch, complemented by call centres in Sydney and Melbourne and provincial Victoria.