Financing solutions provider JustKapital (ASX: JKL) has announced it will spend A$68.8 million to acquire a 100% interest in United States personal injury financier National Health Finance HoldCo.
The transaction is subject to shareholder approval next month and will reinforce JustKapital’s focus on supporting the legal fraternity through disbursement and lien funding.
The acquisition price, plus additional working capital, will be fully-funded through a combination of cash and JustKapital scrip.
The cash component will be raised from a A$7.5m share placement at A$0.08 per share and a A$42m syndicated loan facility agreed with leading Australian institutions and family offices including placement underwriter Washington H. Soul Pattinson & Company (via its subsidiary Pitt Capital Partners).
Both cash sources are expected to settle following shareholder approval.
A 1:1 non-renounceable rights issue will also be offered to existing shareholders to enable them to participate on the same terms as the share placement.
Based on the expected equity raising price, JustKapital said its post-transaction enterprise value will be approximately A$201m, with free cashflow of approximately A$34.3m for financial year 2019.
Potential for market expansion
National Health Finance (NHF) provides financing solutions for personal injury cases across the US.
The company acquires a lien over medical treatment invoices from providers and hospitals associated with each case and realises a return at case settlement.
The service provides access to healthcare for injured parties, liquidity to medical providers and reduced administrative costs for case lawyers.
JustKapital chief executive officer Diane Jones said the acquisition of NHF has potential for material market expansion through the service’s scalable platform.
“[NHF] has a well-established network of counterparties, robust economics and a large receivables facility to fund growth,” she said.
“This provides an exceptional opportunity for JustKapital to diversify and scale, which directly aligns with [our] funding mechanisms, management capabilities and return profile.”
Post-acquisition, Ms Jones will continue as JustKapital group CEO. Her responsibilities will include overseeing operations in Australia and the US, as well as managing the group’s strategic direction, cashflow and funding requirements.
NHF managing director and co-founder David Wattel will be invited to join JustKapital’s board of directors.
Mr Wattel and NHF co-founder Mark Siegel will sign three-year employment agreements and become significant shareholders in JustKapital. They will each receive approximately 215.1m shares in JustKapital at a deemed issue price of A$0.08 per share (escrowed for three years), subject to shareholder approval.
Earlier this month, JustKapital confirmed plans to dispose of its litigation portfolio and retain a core focus on disbursement funding and the provision of short-term loans to law firms.
At midday, shares in JustKapital remained steady at $0.074.