Kvika acquires majority stake in Ortus
Kvika banki hf. (“Kvika”) has agreed on terms and conditions with the shareholders and the management team of Ortus Secured Finance Ltd. (“Ortus”) to acquire a controlling interest in Ortus.
Ortus is a UK alternative credit provider specializing in mortgage-backed loans to borrowers in the UK. The company was founded in 2013 and currently manages a private credit portfolio equivalent to ISK 23 billion, of which ISK 14.5 billion is held on Ortus’ own balance sheet. If the transaction continues, the total consolidated assets of the Kvika group are expected to increase by 10%.
Ortus is headquartered in London and the company also has offices in Belfast, Northern Ireland and Glasgow, Scotland. Since its launch in 2013, Ortus has advanced over 70 billion ISK equivalents to borrowers without incurring capital losses.
Kvika, through its subsidiary Kvika Securities Ltd. (“KSL”), currently owns 15% of the ordinary shares of Ortus, which it acquired in 2018. Since then, Kvika has worked with the company’s management and shareholders to support its growth journey. During this period, Ortus significantly expanded its operations and lending volumes, and is expected to generate an after-tax profit of around 600 million ISK equivalents in 2021, an increase of more than 20% over the previous year. last year. The book value of Ortus’ equity is expected to reach nearly 4 billion ISK equivalents by the end of 2021.
Following the acquisition, the financing synergies are expected to significantly reduce the cost of financing Ortus, allowing the company to offer its clients new property-backed credit products at more competitive rates, while strengthening still profitability.
Once the acquisition is completed, Kvika will own nearly 80% of Ortus’ capital. Stoðir hf. is currently Ortus’ largest shareholder with a 30% stake in Ortus ordinary shares. As part of the transaction, Kvika will acquire all of the stake in Stoðir and all of the holdings of the other minority shareholders, as well as part of the stake of the management team. As Stoðir is a shareholder of Kvika, a fairness opinion will be requested from an independent professional third party.
Richard Beenstock, CEO of Ortus, and Jon Salisbury, CEO of Ortus, both existing shareholders, will continue to hold a significant stake in Ortus following the acquisition and will continue to manage day-to-day operations alongside the experienced team at Ortus. the society. of professionals in the years to come. Örvar Kærnested, who is also an existing shareholder and has been chairman of the Ortus board in recent years, will also continue to have an interest in the company and will continue to serve on its board of directors. As part of the arrangement, Kvika will acquire the approx. 20% of Ortus’ capital over the next four years at a valuation determined by the company’s results over the period.
The memoranda of understanding, signed by the parties, allocate a valuation of ISK 4.2 billion equivalent to the ordinary share capital of Ortus, of which Kvika Securities holds just over ISK 600 million. In addition, Kvika is expected to purchase all of the issued preferred shares of Ortus. The attributed value of which is just under 2 billion ISK, of which Kvika holds just under 600 million euros. The consideration will be paid in cash, as no new share issuance is required due to the bank’s strong capital position.
Due diligence and documentation will be undertaken in the coming weeks. The transaction should be finalized in the coming months. The acquisition is subject to the approval of regulatory authorities and the Board of Directors after due diligence and documentation. Further information regarding the impact on Kvika’s operations and balance sheet will be published at the latest when the transaction is finalized.
Marinó Örn Tryggvason, CEO of Kvika BankI hf. :
“Kvika acquired a minority stake in Ortus in 2018 and has since enjoyed a fruitful collaboration with the company and its management team. The acquisition is a logical next step for Kvika’s growth strategy in the UK. Ortus has grown considerably in recent years and we are confident that further significant growth opportunities arise in the near future.
In recent years, Kvika has taken advantage of its strong financial position to increase the profitability of several specialist lenders through acquisitions or mergers, including Lykill, Netgiro, Aur and Framtidin. The acquisition of Ortus is an extension of this strategy. Ortus’ loan portfolio generated exceptionally high risk-adjusted returns, which are expected to improve further with a lower cost of funding as a result of the transaction. In addition, the acquisition will further enhance the geographic diversification of Kvika’s loan exposure, as well as positively contribute to the share of real estate-backed loans in its loan portfolio.