(Alliance News) - Morses Club PLC on Monday said it has acquired U Holdings Ltd, trading as U Account, through its subsidiary Shelby Finance Ltd.
U Account is a digital current account provider offering an alternative to traditional banking. As well as providing card services with its current accounts through contactless Mastercard Inc debit cards, U Account also offers in-app features and functionality to help customers manage their finances more effectively.
The AIM-listed lender said it will buy U Account for an initial cash consideration of GBP5.8 million, financed from its existing cash and debt facilities, and deferred consideration of up to GBP5 million, payable in cash over the next four years to February 2023, conditional upon certain net profit criteria having been met.
As part of the transaction, Morses Club has acquired U Account's technology and e-money banking platform, as well as its 20,000 current active customers. The company believes that the acquisition of U Account will help its customers to access credit flexibly, as "many" of Morses Club's existing 235,000 customers have expressed interest in opening an online current account.
For the year that ended on February 28, U Account generated revenue of GBP1.7 million and operating loss of GBP4.0 million. Morses Club said it expects that post integration and restructuring, the losses incurred in the remainder of its financial 2020, which will end on February 23 next year, will be in the range of GBP1.4 million to GBP1.7 million. However, the company said it is confident that the acquisition will be earnings accretive thereafter.
Looking ahead, the company said it intends to "at least" maintain its annual payout for financial 2020 at 7.8 pence.
"This acquisition represents a fantastic opportunity to enter the rapidly growing online banking market," said Morses Club Chief Executive Paul Smith.
"Our differentiated use of technology and innovation enables Morses Club's customers to access a broader range of more flexible and suitable credit," added Smith.
Morses Club shares were trading 2.6% lower on Monday at 151.00 pence each.
