How Will Cash Converters’ $25M Raise Transform Its Store Network?
Cash Converters International Limited has launched a $25 million equity raising to fund the acquisition of 29 Australian franchise stores, aiming to expand its corporate store network and enhance earnings. The move is backed by major shareholder EZCORP, signaling confidence in the company’s growth strategy.
- Equity raising of ~$25 million via placement and entitlement offer at $0.305 per share
- Acquisition of 29 franchise stores for $37 million, expected to be earnings accretive
- EZCORP commits to full entitlement subscription and partial sub-underwriting
- Corporate store network to expand from 92 to 121 stores on completion
- Acquisition subject to conditions precedent; alternative fund uses planned if deal falls through
Strategic Equity Raising to Fund Expansion
Cash Converters International Limited (ASX, CCV) has announced a fully underwritten equity raising of approximately $25 million, designed to finance the proposed acquisition of 29 franchised stores across Australia. This capital raise comprises a $5 million placement to institutional investors and a $20 million accelerated non-renounceable entitlement offer priced at $0.305 per new share, representing a discount to recent trading prices.
The equity raising is a critical step in Cash Converters’ strategy to grow its corporate store network, which currently stands at 92 stores. Upon completion of the acquisition, the network will expand to 121 stores, significantly strengthening the company’s presence along Australia’s populous east coast corridor, from Western Sydney through to the Sunshine Coast.
Acquisition Details and Financial Implications
The acquisition targets the Cash Converters Investment Group, a network of 29 franchised stores located in Queensland, New South Wales, the Australian Capital Territory, and Tasmania. The agreed purchase price is $37 million, reflecting a blended earnings multiple of 4.5 times the actual FY25 EBITDA. Management forecasts the acquisition to be earnings accretive in the first full year under Cash Converters’ ownership, highlighting the operational leverage and synergy potential from integrating these stores into the corporate segment.
CEO Sam Budiselik emphasized the strategic value of the deal, noting that it complements recent acquisitions and positions the company well for further growth in high-demand regions. The acquisition is expected to unlock cross-selling opportunities in retail and lending, improve group buying power, and support margin expansion through scale and efficiency.
Support from Major Shareholder EZCORP
EZCORP, Inc, Cash Converters’ largest shareholder with a 43.87% stake, has expressed strong support for the equity raising. EZCORP has committed to fully subscribe for its entitlement, amounting to approximately $8.73 million, and will partially sub-underwrite the retail entitlement offer up to $2.18 million. This commitment underscores EZCORP’s confidence in the company’s growth trajectory and the value of the acquisition.
The equity raising is fully underwritten by Bell Potter Securities Limited, providing further assurance of capital raising success. However, the acquisition remains subject to several conditions precedent, including due diligence, board approval, and successful capital raising. Should the acquisition not proceed, Cash Converters intends to deploy the raised funds towards alternative store acquisitions aligned with its growth strategy.
Market and Investor Considerations
The offer price of $0.305 per share represents an 11.54% discount to the theoretical ex-rights price and a 12.86% discount to the last closing price, reflecting a typical equity raising concession to attract investor participation. The issuance of approximately 82 million new shares will dilute existing shareholders by about 13%, a factor investors will weigh against the anticipated earnings accretion and strategic benefits of the acquisition.
Cash Converters plans to complete the acquisition by early December 2025, with the retail entitlement offer scheduled to close mid-November. Investors will be watching closely for updates on the acquisition’s progress and the company’s execution of its growth plans.
Bottom Line?
Cash Converters’ $25 million equity raise and $37 million acquisition mark a pivotal step in expanding its corporate footprint, but successful execution remains key to unlocking shareholder value.
Questions in the middle?
- Will the acquisition of the 29 franchise stores deliver the forecasted earnings accretion in practice?
- How might the increased ownership stake of EZCORP influence Cash Converters’ strategic direction?
- What alternative growth opportunities will Cash Converters pursue if the acquisition does not complete?
