GLIF to Acquire Rapidly Growing Channel Island Lender?

GLI Finance may be on the verge of acquiring one of the many SME finance providers that it has backed in recent times.

The specialist SME finance provider will now await confirmation as to whether or not the purchase of Channel Islands-based Sancus Limited will go through. The proposed acquisition is for a total consideration of £37.75m – but will require the go-ahead from both GLIF and Sancus shareholders before being finalized. Payment of the £37.75m will be satisfied through the issuance of a proportionate number of GLIF shares – roughly 31.5m new ordinary shares and 20m new redeemable zero dividend preference (ZDP) shares. More precise details of the trade can be found on GLIF’s website.

The Sancus proposition represents an offline, high net worth version of the standard peer-to-peer lending model. Whilst focused on lending to SMEs, Sancus is not facilitating lending to the same sorts of businesses as, say, Funding Circle. Instead the company hooks up high net worth investors with high net worth borrowers – all within the Channel Islands vicinity.

So what’s the logic behind this move from GLI Finance? The prolific platform-backer has pointed to three core motivations:

• GLIF will acquire a new income stream in the form of Sancus’ current loan book. That loan book currently amounts to £47.6m – spread across 20 transactions – of which £4.5m has been repaid. Sancus is also said to have a significant pipeline of deals waiting in the wings.
• GLIF will look to leverage Sancus’ substantial network of Channel Island-based high net worth individuals and family offices. The plan is for these investors to be used as a future source of capital not just for Sancus but for GLIF’s entire armada of alternative finance providers.
• The final reason for the proposed acquisition is to benefit from Sancus’ highly experienced management team. GLIF has suggested that it plans to reorganize its investment activities into two distinct divisions – “Lending” and “Platforms”. Andrew Whelan, currently CEO of Sancus, will be appointed to the newly created post of Director of Lending – responsible for loan origination and management – should today’s transaction go through.

Geoff Miller, CEO of GLI Finance, summarized:

“This acquisition represents a key event in the Company’s development; not only immediately delivering an existing loan book and income stream but also an exciting platform from which to expand into other offshore jurisdictions. Alongside this, we will benefit from the experience of a hugely talented management team with loan origination capabilities that will drive the growth of our proprietary loan book.”

Perhaps most significantly, if the deal is confirmed it will be worth approximately £18.3m to the ordinary shareholders of Sancus – as per the current GLIF share price. That's the same shareholders who invested just £3.2m into Sancus less than 12 months ago – equating to an appreciation of c.5.7x the value of the original investment.

Today’s news offers some kind of explanation as to why nascent alternative finance providers all over the world are attracting such hefty early-stage equity investments. If the proposed GLIF acquisition goes through, it will surely serve to increase the global appetite among VC groups for a slice of the next big peer-to-peer lending platform.

Andrew Whelan, the aforementioned CEO of Sancus Holdings Limited, had the final word:

“Having GLI Finance as an investor for nearly a year has made clear the synergies that are possible between Sancus and GLI Finance’s other investments, to the benefit of all involved. I look forward to being a part of this exciting stage of growth for GLI Finance, which has already built an impressive and diverse portfolio of alternative finance platforms.”