Ultimate Finance Group (LON:UFG), the AIM-quoted factoring, invoice discounting and financial solutions provider to the SME sector, has agreed a deal to buy rival firm Ashley Commercial Finance Ltd for an initial fee of £4.75m in cash and shares. Ultimate is funding the deal with the proceeds of a £2.75m share placing priced at 12p per share and a new £2m acquisition finance facility. Shares in Ultimate have been suspended from trading since September 22 while the final deal negotiations were underway. As part of the transaction the company is paying an initial £3.7m of cash and £1.05m of shares and could pay a further £2.7m depending on Ashely’s future performance.

While the deal is still subject to shareholder approval, Ultimate said it would create an independent national force in the growing factoring and invoice discounting market and that the businesses were highly complementary, serving clients of different typical size, bringing major potential synergistic benefits. The advantages are understood to include access to new clients and introducers, a strengthened presence in north-west England, opportunities in new markets and client retention through mutual referrals and leveraging Ultimate's wider product range. This year Ashley reported an operating profit of £0.7m, a loan book of £4.4m and net assets of £0.94m. As part of the deal, Lloyds Bank has increase the funding available to enlarged group to £34m.

Clive Garston, the chairman of Ultimate, said: “Our focus remains the achievement of sustained growth and we see this acquisition as an opportunity to build shareholder value while minimising risk and extending our service into new markets. Among the many opportunities we have seen over the years, Ashley stands out as highly complementary. For Ultimate, this is a transformational acquisition allowing it to achieve scale and synergistic benefits. We believe we will continue to see growth in demand for our services as banks restrict the overdraft facilities available to SMEs. This deal also positions the Company well for any market upturn. We are delighted to have secured the backing of existing and new investors for the placing and to see the offer over-subscribed."

In September Ultimate published its results for the year to June 30, which showed revenues increasing by 35% to £6.4m and pre-tax profits broadly flat at £0.4m. During the year the company expanded its…

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