Yellow Brick Road, the financial services company founded and chaired by Wizard Home Loans founder Mark Bouris, has found an unlikely investor in Nine Entertainment Company.
The $13 million deal with Nine, the private equity-backed owner of the east coast Nine networks and ACP magazines, at first seems an unlikely pairing.
The agreement is effectively an advertising partnership, with half of the $13 million to be provided in the form of ads in Nine’s various businesses over five years, and the other half in cash.
Under the deal, Nine will be granted a 19.9% stake in Yellow Brick Road, and a board representative. The tie-up values Yellow Brick Road at 40 cents per share.
Yellow Brick Road says the deal was rooted in the “longstanding relationship between Bouris and Nine chief David Gyngell.”
“They’ve worked together in the past and it’s been successful, so why not do it again?” a spokeswoman told SmartCompany.
In its former life as Publishing & Broadcasting Ltd, Nine owned 25% of non-bank lender Wizard Home Loans, which was founded and chaired by Bouris. Wizard was sold to US giant GE in 2005 for $500 million-odd.
Gyngell said he had had “great success” in previous work with Bouris and his team, and the media company is “very confident that Yellow Brick Road has the people, the business model and the know-how to make a positive… difference in the financial services sector.”
Yellow Brick Road was established by Bouris in 2007 and has almost 60 shopfronts. It offers financial advice, management, execution and administration services, and related professional services in areas of taxation, accounting, estate planning, insurance and finance broking.
Yellow Brick Road hopes the deal will “catapult” it as the “non-bank leader in the financial services sector”, and will enable it to build its brand with the backing of the “best media company in the business”.
Bouris will remain Yellow Brick Road’s largest shareholder, with his Golden Wealth Holdings to hold 26.7% of the group, from 33.4% previously. Senior members of Yellow Brick Road’s management team also hold stakes in the business.
Nine is now owned by CVC Asia-Pacific. Plans for a stockmarket listing are believed to be off the agenda, but Yellow Brick Road is at the final stages of a public capital raising.
“The prospectus is scheduled to be out in the next week or so,” the spokeswoman said.
No value has been put on the raising at this point.
Two months ago, an independent expert’s report backed Yellow Brick Road’s reverse takeover of ITS Capital Investments Ltd, taking the financial services firm closer to listing.
The number of Yellow Brick Road branches rose from 15 at the end of December 2009 to 37 at the end of September 2010. In February, the company said it was trying to launch three or four branches a month, with a target of 150 branches by June 2014. It says now it’s going opening approximately one per week.
According to a report by independent expert Grant Thornton, Yellow Brick Road produced $13,605 in 2009-10, on revenue of $8.9 million. Revenue in the five months to November 2010 was $4.05 million (suggesting annual revenue of just under $10 million) although the company produced a loss of $301,000 due to costs associated with expansion costs.
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