iFast to acquire 85% stake in UK digital bank for $74 million

SINGAPORE (THE BUSINESS TIMES) - Wealth management platform iFast Corporation is looking to acquire an 85 per cent stake in BFC Bank for a total investment amount of £40 million (S$74 million).

In a bourse filing on Friday (Jan 7), the company said it has entered into an agreement with its partner Eagles Peak to acquire BFC Bank - a fully licensed UK bank operating under the Financial Services Compensation Scheme - from Bahrain-based BFC Group.

Eagles Peak is a bidding company incorporated in 2020 for the purposes of acquiring BFC Bank. Currently, its sole shareholder is MMSS Investments. After the proposed acquisition, iFast will hold an 85 per cent stake in Eagles Peak, while MMSS Investments will hold a 15 per cent stake.

The acquisition, which will enable the group to add a digital bank to its fintech ecosystem, is part of iFast's five-year plan to have a global business model.

The company said that while it has made "substantial progress" as a wealth management platform, "a lot more can be achieved if there is a bank within the group".

iFast expects adding a bank will allow it to acquire more customers globally at a faster pace, while a digital bank can be run as a capital-efficient, asset-light and scalable business model, as compared with traditional banks.

iFast chairman and chief executive Lim Chung Chun also noted that the proposed acquisition will allow the group to acquire a banking licence in the United Kingdom, which is a reputable jurisdiction and a global financial centre.

Around £22.6 million of the total investment amount will be used to fund the acquisition, while £15 million will be used to fund a capital injection with BFC Bank. The remaining £2.4 million will be used by Eagles Peak to offset transaction costs incurred from the acquisition.

The company intends to finance the proposed acquisition through internal funds, bank borrowings and/or fund raising in the capital markets.

iFast expects the proposed acquisition will contribute some initial start-up losses in 2022 and 2023.

BFC Bank posted a net loss of £2.2 million for the nine months ended Sept 30, 2021. For iFast, this translates to a net loss - attributable to the assets it plans to acquire - of £1.9 million for the same period.

However, as a group, iFast said it will likely see robust growth in profitability between 2021 and 2025, helped by contributions from its ePension division in Hong Kong.

If the proposed acquisition was completed on Dec 31, 2020, iFast's pro forma net tangible assets per share would fall to 18.15 cents from 28.38 cents. 

Meanwhile, its pro forma earnings per share, assuming the transaction was completed on Jan 1, 2020, would fall to 5.22 cents from 7.64 cents.

The proposed acquisition is conditional upon approval from the Prudential Regulation Authority and the Financial Conduct Authority in the UK, and either shareholders' approval or a waiver of shareholders' approval granted by the Singapore Exchange.

Shares of iFast closed at $8.17, down nine cents or 1.1 per cent, on Thursday, before it called for a trading halt on Friday morning.