Armaguard rejects $26 million lifeline after being asked to open its books

The nation’s key cash transit business Armaguard has snubbed a $26 million lifeline from Australia’s biggest banks and retailers, and will receive a $10 million cash injection from its parent company Linfox instead, keeping the company afloat over the coming weeks.

Armaguard, which controls about 90 per cent of the cash transportation sector, has been in crisis talks with banks and retail giants about a rescue, after warning last year its viability was being put at risk by the sharp decline in cash usage.

In a consortium led by the Australian Banking Association (ABA), the Commonwealth Bank, NAB, Westpac, ANZ, Coles, Woolworths, Wesfarmers and Australia Post last Tuesday put the $26 million offer to Armaguard with a deadline to respond by 3pm Thursday, and subject to what they considered reasonable conditions.

After requesting financial support, Armaguard has rejected a $26 million lifeline from the banks and major retailers to receive $10 million from its parent company instead.

However, a source close to negotiations but not authorised to speak publicly said the conditions put on the deal were unworkable and too restrictive for Armaguard, and the company would seek funding support from customers individually.

“Armaguard can confirm it is working constructively with all its customers, including its retail customers, banks and other key stakeholders regarding both short-term and long-term financial solutions for the industry to remain sustainable. However, Armaguard rejects the timing ultimatum by the ABA,” said Armaguard chief executive Mick Cronin in a statement.

“Armaguard continues to operate its full suite of services and is confident that over the coming months, it will get the business onto a long-term sustainable footing with appropriate support from the industry.”

The conditions of the deal included assurances that the money would be used to support Armaguard’s cash services and would not be diverted to other parts of the Linfox business.

But a source said the 45-page document outlining the deal was exhaustive and restrictive over the way the Armaguard business operated. Armaguard will still seek funding from customers to keep the business sustainable, but has signalled it will do so without being “chaperoned [by the Australian Banking Association] through that process,” they said.

Australian Banking Association chief executive Anna Bligh said Linfox’s cash injection was a welcome development.

“We welcome Armaguard’s commitment that they will continue to operate and have secured funds from their parent company to maintain their full suite of services,” she said.

After Armaguard approached businesses about needing financial support, the RBA convened several roundtables involving Treasury, the ABA, the banking sector and major retailers to present Armaguard with a bail-out offer.

“This offer of financial support was made in good faith to ensure the last major cash-in-transit company can continue to serve its customers,” Bligh said.

“However, it is entirely up to Armaguard to decide how to fund their business and the decision of the parent company Linfox to fund them is a welcome development. The banking sector remains committed to ensuring cash is accessible for customers.”

Armaguard has become increasingly unprofitable as banks remove ATMs and Australians increasingly lower their use of cash in favour of digital payment and banking. To secure cash supplies, banks and retailers scrambled to assemble a short-term funding lifeline. Linfox has previously indicated it was unwilling to provide further funding to Armaguard.

After the $26 million offer was pitched last Tuesday, the consortium penned a letter expressing confusion at Armaguard’s unwillingness to reach a deal.

“This approach undermines the spirit of good faith negotiations aimed at supporting the ongoing operation of your business,” stated the letter, dated Tuesday 26.

“Your team does not appear to have had a genuine commitment to ensure that any funding package could be agreed and approved by the ACCC before 27 March 2024, as Armaguard had requested.”

As the Thursday deadline loomed, Coles lowered cash-out limits from $400 to $200 and paused Armaguard deliveries until April 5. The supermarket has since resumed cash collection and processing in light of Linfox’s $10 million injection.

A meeting was held on Wednesday between the consortium and Armaguard and the Reserve Bank of Australia chair Michele Bullock. Linfox was represented by former Australian Council of Trade Unions secretary Bill Kelty, who is a board director of the logistics business.

A source with knowledge of the meeting but unauthorised to speak publicly said it had become clear Armaguard had misled the consortium about the company’s financial position. The source said Armaguard’s rejection of the deal has damaged good faith negotiations, as Linfox’s commitment to funding Armaguard represented a reversal of its position from weeks ago.

Coles, Woolworths, Wesfarmers, and Australia Post declined to comment further.

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