Propel to Accelerate Global Expansion with the Acquisition of QuidMarket for US$71 Million and Announces Concurrent C$100 Million Bought Deal Offering of Subscription Receipts

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[The base shelf prospectus is accessible, and the shelf prospectus supplement will be accessible within two business days, through SEDAR+]

TORONTO, Sept. 26, 2024 /CNW/ - Propel Holdings Inc. ("Propel" or the "Company") (TSX: PRL) the fintech facilitating access to credit for underserved consumers, today announced that it has entered into a definitive agreement to acquire Stagemount Limited (dba "QuidMarket"), a leading digital UK-based fintech lender specializing in credit for underserved consumers (the "Acquisition").

Acquisition Highlights

• Launched in 2011, QuidMarket is one of the UK's leading digital direct lending platforms, focused on the underserved consumer
• Accelerates Propel's growth strategy through global expansion, with a foothold in UK market
• Expands access to credit and best-in-class products for underserved UK consumers, where demand for credit exceeds supply
• The existing management team at QuidMarket will continue to operate the business on a go- forward basis
• Management believes the Acquisition will be immediately accretive to Propel's 2024 and 2025 Adjusted Earnings Per Share, on a pro forma basis, and excluding transaction costs and prior to any potential synergies
• US$71 million acquisition price (all cash) to be financed through concurrent offering of subscription receipts

"The acquisition of QuidMarket will accelerate Propel's growth and is a critical step in our journey to becoming a global leader," said Clive Kinross, Chief Executive Officer, Propel. "When we went public three years ago, we set a goal to grow globally. As disciplined operators with a track record of profitable growth, this acquisition had to meet our strict acquisition criteria including a favourable operating jurisdiction, a strong cultural fit and to be financially accretive to our shareholders. QuidMarket serves a market of more than 20 million underserved consumers in the UK where the demand for credit far exceeds supply. Backed by Propel's AI-powered technology, financial and operational expertise, and capital resources, we believe QuidMarket will be able to accelerate its growth while broadening access to credit for more underserved consumers. The QuidMarket team has demonstrated deep experience and a customer focus that sets them apart. United by a shared purpose, together we will build a new world of financial opportunity for consumers globally." 

Acquisition Benefits

Accelerates Growth Strategy - The Acquisition is an important step in Propel's global expansion strategy. Since its initial public offering in October 2021, Propel has continued to broaden its product and geographic offerings with the introduction of Fora Credit in Canada, Lending-as-a-Service partnerships in the US, and, most recently, an embedded lending partnership with KOHO in Canada. Based in Nottingham, UK, QuidMarket has served UK consumers since 2011 and is growing into a market leader. The UK market has an estimated 20 million underserved consumers and provides a foothold in the large underserved European market. Existing QuidMarket management, with deep experience in the UK market, will continue to operate the company on a go-forward basis.

Leverages Propel's Capabilities – A fully online, lending solution, QuidMarket is built on scalable and flexible technology that has originated over 310,000 loans to underserved consumers in the UK since beginning operations in 2011. Supported by Propel's AI technology, financial and operational expertise, and capital resources, QuidMarket is expected to accelerate its growth and deliver best-in-class products to more UK consumers.

Providing Value Creation for Shareholders – Similar to Propel, QuidMarket has demonstrated a successful track-record of driving meaningful growth and profitability. For the twelve months ended June 30, 2024, QuidMarket generated revenue and net income of approximately US$27.7 million and US$9.6 million, respectively, calculated under UK GAAP.¹

Acquisition Details

The consideration for the Acquisition is comprised of US$71 million of cash payable at closing. The purchase price implies a multiple of approximately 7.4x QuidMarket's net income for the twelve months ended June 30, 2024, calculated under UK GAAP. The Company intends to fund the purchase price for the Acquisition with the net proceeds from the Offering (as defined below).

Management expects that the Acquisition will be immediately accretive to Propel's full year 2024 and 2025 Adjusted Earnings Per Share, on a pro forma basis, and excluding transaction costs and prior to potential synergies. Following the completion of the Acquisition and the Offering, Propel expects to operate the combined business with a Debt-to-Equity ratio of approximately 1.3x as of June 30, 2024. See "Forward-Looking Statements" and "UK GAAP and Non-IFRS Financial Measures".

Closing Details

The Acquisition is expected to close in either Q4 2024 or in early Q1 2025, subject to the satisfaction of customary closing conditions, including the receipt of applicable regulatory approvals, including the approval of the Financial Conduct Authority ("FCA").

Bought Deal Equity Offering of Subscription Receipts

Concurrent with the execution of the definitive agreement, the Company has entered into an agreement with a syndicate of underwriters (the "Underwriters") co-led by Canaccord Genuity Corp. and Scotia Capital Inc. pursuant to which the Underwriters have agreed to purchase, on a bought deal basis, 3,640,000 subscription receipts (the "Subscription Receipts") of the Company at a price of C$27.50 per Subscription Receipt (the "Offering Price") for aggregate gross proceeds to the Company of approximately C$100 million (the "Offering"). The Company has also granted the underwriters an over-allotment option to purchase up to an additional 15% of the Offering on the same terms and conditions, for market stabilization purposes, exercisable at any time, in whole or in part, until the earlier of: (i) 5:00pm on the day that is 30 days following the closing of the Offering and (ii) the date that a termination event occurs (the "Over-Allotment Option"), which, if exercised in full, would increase the gross proceeds of the Offering to approximately $115 million.

The Company intends to use the net proceeds from the Offering to fund the purchase price for the Acquisition. The balance of net proceeds, if any, will be used for working capital and general corporate purposes. The proceeds from the sale of the Subscription Receipts payable to the Corporation, will be held by an escrow agent pending the fulfillment or waiver of all outstanding conditions precedent to closing of the Acquisition (other than the payment of the consideration for the Acquisition). There can be no assurance that the applicable closing conditions will be met or that the Acquisition will be consummated.

Upon the closing of the Acquisition: (a) one common share will be automatically issued in exchange for each Subscription Receipt (subject to customary anti-dilution protection), without payment of additional consideration or further action by the holder thereof; and (b) an amount per Subscription Receipt equal to the per-share cash dividends declared by the Company on the common shares to holders of record on a date during the period that the Subscription Receipts are outstanding, net of any applicable withholding taxes, will become payable in respect of each Subscription Receipt.

If the Acquisition is not completed as described above by March 26, 2025 or if the Acquisition is terminated at an earlier time, the gross proceeds of the Offering and pro rata entitlement to interest earned or deemed to be earned on the gross proceeds of the Offering, net of any applicable taxes, will be paid to holders of the Subscription Receipts, and the Subscription Receipts will be cancelled.

The Subscription Receipts will be offered pursuant to a prospectus supplement (the "Prospectus Supplement") to the Company's short-form base shelf prospectus dated May 10, 2024, which is expected to be filed in each of the provinces of Canada, except Québec, on or about September 30, 2024. Further information regarding the Offering and the Acquisition, including related risk factors, will be set out in the Prospectus Supplement. The Offering is expected to close on or about October 3, 2024 and is subject to certain conditions including, but not limited to, the approval of the Toronto Stock Exchange. Access to the Prospectus Supplement, the corresponding base shelf prospectus and any amendment to the documents is provided in accordance with securities legislation relating to procedures for providing access to a shelf prospectus supplement, a base shelf prospectus and any amendment to the documents. The base shelf prospectus is accessible, and the Prospectus Supplement will be accessible within two business days, through SEDAR+ at www.sedarplus.com.

An electronic or paper copy of the Prospectus Supplement, the corresponding base shelf prospectus and any amendment to the documents may be obtained, without charge, from the Corporate Secretary of the Company at 69 Yonge St., Suite 1500, Toronto, ON, M5E 1K3, Canada (telephone (647) 776-5479), by providing the contact with an email address or address, as applicable. 

The base shelf prospectus and Prospectus Supplement will contain important detailed information about the Company and the Offering. Prospective investors should read the shelf prospectus and Prospectus Supplement (when filed) and the other documents the Company has filed on SEDAR+ before making an investment decision.

The Subscription Receipts and the underlying common shares have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, (the "1933 Act") and may not be offered, sold or delivered, directly or indirectly, in the United States, or to, or for the account or benefit of, "U.S. persons" (as defined in Regulation S under the 1933 Act), except pursuant to an exemption from the registration requirements of the 1933 Act. This press release does not constitute an offer to sell or a solicitation of an offer to buy any Subscription Receipts or the underlying common shares in the United States or to, or for the account or benefit of, U.S. persons.

Investor Call

Propel will be hosting a conference call and webcast with a presentation by Clive Kinross, Chief Executive Officer, and Sheldon Saidakovsky, Chief Financial Officer at 5:30pm EDT on September 26, 2024 to discuss the Acquisition.

Advisors and Counsel

In connection with the Acquisition, Canaccord Genuity Corp. acted as the exclusive financial advisor to Propel and Stikeman Elliott LLP and A&O Shearman acted as legal advisors. Nelson Mullins Riley & Scarborough LLP, Fogler Rubinoff LLP and Walker Morris LLP acted as legal advisors to QuidMarket. Blake, Cassels & Graydon LLP is acting as legal counsel to the Underwriters with respect to the Offering.

About Propel

Propel Holdings (TSX: PRL) is the fintech company building a new world of financial opportunity for consumers, partners, and investors. Propel's operating brands — Fora Credit, CreditFresh and MoneyKey — and our Lending-as-a-Service product line facilitate access to credit for consumers underserved by traditional financial institutions. Through its AI-powered platform, Propel evaluates customers in a more comprehensive way than traditional credit scores can. The result is better products and an expanded credit market for consumers while creating sustainable, profitable growth for Propel.  Our revolutionary fintech platform has already helped consumers access over one million loans and lines of credit and over one billion dollars in credit. At Propel, we are here to change the way customers, partners and investors succeed together. Learn more at www.propelholdings.com

(www.foracredit.ca, www.creditfresh.com, www.moneykey.com)

About QuidMarket

Launched in 2011, QuidMarket is a leading UK-based digital only consumer lender specializing in providing short-term installment loans to individuals with limited access to traditional financial solutions. QuidMarket is committed to responsible lending, offering tailored financial support to help consumers manage unexpected expenses.

Forward Looking Statements

This press release contains certain forward-looking statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation that are based on Propel's current expectations, estimates, projections and assumptions in light of its experience and its perception of historical trends. In particular, this press release contains forward-looking statements pertaining to Propel's business strategy, plans and other expectations, beliefs, goals and objectives including, without limitation, the following: the Acquisition, including the terms thereof, the expected closing date, QuidMarket's management's continued involvement in the business and the anticipated benefits thereof, including the anticipated synergies and accretive value to Propel and its shareholders; the financing of the Acquisition, including statements regarding the Offering, as well as Propel's expectations with respect thereto, including the size of the Offering and the completion and timing thereof, the timing of the distribution of the Subscription Receipts pursuant to the Offering and the distribution of common shares upon closing of the Acquisition; statements regarding the effects of the Acquisition on Propel's financial and operational outlook and performance following closing of the Acquisition and completion of the Offering; Propel's corporate strategy and the development and expected timing of growth opportunities; and financial guidance and outlooks following completion of the Acquisition, including Propel's expectations regarding adjusted earnings per share, debt-to-equity ratio and potential synergies resulting from the Acquisition. Often but not always, forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "expect", "believe", "intend", "estimate", "continue", "anticipate" or the negative of these terms or variations of them or similar terminology suggesting future outcomes, events or performance. The forward-looking statements in this press release reflect management's current beliefs and are based on information currently available to management, and are based on certain assumptions that Propel has made in respect thereof as at the date of this press release regarding, among other things: the satisfaction of the conditions to closing of the Acquisition and the Offering in a timely manner, including receipt of all necessary approvals; that both the Acquisition and the Offering will be completed on terms consistent with management's current expectations; that Propel has and will have available capital to fund the Acquisition and its capital expenditures, among other things; the success of Propel's operations; the ability of Propel to maintain current credit ratings; the availability of capital to fund the Acquisition and future capital requirements relating to existing assets and projects; future operating costs, including costs associated with regulatory compliance in the UK; that all required regulatory approvals can be obtained on the necessary terms in a timely manner; prevailing regulatory and tax laws and regulations; maintenance of operating margins; and certain other assumptions in respect of Propel's forward-looking statements detailed in Propel's Annual Information Form for the year ended December 31, 2023 (the "AIF"), Management's Discussion and Analysis for the years ended December 31, 2023 and 2022 (the "Annual MD&A") and Management's Discussion and Analysis for the three and six months ended June 30, 2024 (the "Interim MD&A") and from time to time in Propel's public disclosure documents available at www.sedarplus.ca and through Propel's website at www.propelholdings.com. 

Although Propel believes the expectations and material factors and assumptions reflected in these forward-looking statements are reasonable as of the date hereof, there can be no assurance that these expectations, factors and assumptions will prove to be correct. These forward-looking statements are not guarantees of future performance and are subject to a number of known and unknown risks and uncertainties that could cause actual events or results to differ materially, including, but not limited to: the ability of Propel and QuidMarket to receive all necessary regulatory approvals and satisfy all other necessary conditions to closing of the Acquisition on a timely basis or at all; the failure to realize the anticipated benefits and synergies of the Acquisition following completion thereof due to integration or other issues; an inability to complete the Offering or other necessary financings in respect of the Acquisition in accordance with management's current expectations or at all; the highly competitive nature of the industry in which Propel operates and the related impact of competitive entities and pricing; reliance on third parties to successfully operate and maintain certain assets; non-performance or default by counterparties to agreements with Propel or one or more of its affiliates; actions taken by governmental or regulatory authorities and costs associated therewith; fluctuations in operating results; adverse general economic and market conditions in Canada, The US, the United Kingdom and worldwide; the ability of Propel to access various sources of debt and equity capital on acceptable terms; changes in credit ratings; counterparty credit risk; and certain other risks and uncertainties detailed in the AIF, Annual MD&A, Interim MD&A, the Prospectus Supplement and from time to time in Propel's public disclosure documents available at www.sedarplus.ca and through Propel's website at www.propelholdings.com. This list of risk factors should not be construed as exhaustive and readers should not place undue reliance on the Company's forward-looking statements. As a result of the foregoing and other factors, no assurance can be given as to any such future results, levels of activity or achievements and neither the Company nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements. The factors underlying current expectations are dynamic and subject to change. Propel does not undertake any obligation to publicly update or revise any forward-looking statements or information contained herein, except as required by applicable laws. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement.

UK GAAP & Non-IFRS Financial Measures

Certain financial information in this press release has been prepared in accordance with generally accepted accounting principles in the United Kingdom ("UK GAAP") which differ in certain material respects from those used to prepare the Company's most recently filed financial statements, being generally accepted accounting principles in Canada, and therefore such financial information may not be comparable to the financial statements of the Company or companies whose financial statements are prepared in accordance with generally accepted accounting principles in Canada.

This press release makes reference to certain non-IFRS financial measures. These measures are not recognized measures under International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS") and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS financial measures by providing further understanding of our results of operations from management's perspective. Accordingly, these non-IFRS financial measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. Non-IFRS financial measures disclosed in this press release include "Adjusted Earnings Per Share", which is a supplemental measure used by management and other users of Propel's financial statements that removes the effect of the non-cash forward-looking credit loss provisions that are recorded on accounts that are otherwise in good standing with no past-due amounts owed, and certain expenses or benefits incurred which in management's view are not indicative of continuing operations on an after-tax basis. Adjusted Earnings Per Share equals Adjusted Net Income divided by the weighted average number of shares outstanding for the given period.

Non-IFRS financial measures are used to provide investors with supplemental measures of Propel's operating performance and thus highlight trends in Propel's core business that may not otherwise be apparent when relying solely on IFRS financial measures. Propel also believes that securities analysts, investors and other interested parties frequently use non-IFRS financial measures in the evaluation of issuers. Propel's management also uses non-IFRS financial measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation.

SOURCE Propel Holdings Inc.