Fin­bond grows foot­print in US

Buys lender Blake En­ter­prises for $9.6m

The Star Early Edition - - COMPANIES - Ka­belo Khu­malo

JSE-LISTED fi­nan­cial ser­vices group Fin­bond said yes­ter­day it had made an­other scoop in the short-term lend­ing mar­ket in the US with the ac­qui­si­tion of Blake En­ter­prises for $9.6 mil­lion (R129m).

The com­pany said the pur­chase was part of its strat­egy to have up to 90 per­cent of its net earn­ings in dol­lars in the next five years.

Fin­bond said the trans­ac­tion would al­low it to ex­pand its foot­print in North Amer­ica.

“Fol­low­ing the Blake En­ter­prises trans­ac­tion, ap­prox­i­mately 60 to 70 per­cent of Fin­bond’s net earn­ings will be de­nom­i­nated in US dol­lars, and the in­ten­tion is to grow US dol­lar earn­ings to ap­prox­i­mately 80 to 90 per­cent of net earn­ings in three to five years.

“Fol­low­ing this trans­ac­tion, Fin­bond will have a pres­ence in 16 US states: Cal­i­for­nia, Illinois, Wis­con­sin, Mis­souri, South Carolina, Ten­nessee, New Mex­ico, Utah, Ne­vada, Louisiana, Mis­sis­sippi, Alabama, Ok­la­homa, Michi­gan, Florida and In­di­ana. In ad­di­tion to the US, Fin­bond has a pres­ence in On­tario, Canada,” the com­pany said.

Fin­bond said that, as part of the deal, it would pay $9.6m for a 75-per­cent stake in Blake En­ter­prises on con­di­tion that Blake de­liv­ered a profit war­ranty to achieve earn­ings be­fore in­ter­est, tax, de­pre­ci­a­tion and amor­ti­sa­tion of $3.2m for the year to the end of June 2018.

The com­pany said 50 per­cent of the pur­chase con­sid­er­a­tion would be payable in cash on the ef­fec­tive date of the trans­ac­tion, while the bal­ance would be paid a year af­ter the ef­fec­tive date.

It said the re­main­ing 25 per­cent of Blake En­ter­prises would be owned by the found­ing Blake fam­ily.

Fin­bond said Blake has a pres­ence in five states in the US and has been in op­er­a­tion for 51 years, of­fer­ing short-term un­se­cured loans and in­stal­ment loans through its 52 brick-and­mor­tar lo­ca­tions in Ten­nessee, Alabama, Louisiana, Ok­la­homa and Mis­sis­sippi.

Fin­bond valued Blake’s nor­malised as­sets at the end of De­cem­ber at $5.9m, while it re­ported a profit of $2.4m for the year to the end of De­cem­ber.

The Blake deal marks Fin­bond’s fifth ac­qui­si­tion in North Amer­ica in less than two years. Last year, the group bought 50 per­cent of a US-based mi­crolen­der for R543m with the op­tion of ac­quir­ing the rest of the shares in Oc­to­ber.

The group also ac­quired three other US-based mi­crolen­ders: Cash­back, for $8m; Amer­i­can Cash Ad­vance ($8m) and Cash in a Flash ($1.2m). It also bought Cash Stop Canada for C$6.5m (R67m).

Mi­crolend­ing is a lu­cra­tive in­dus­try in the US. Ac­cord­ing to The Pew Char­i­ta­ble Trust, 12 mil­lion Amer­i­cans take out pay­day loans each year, spend­ing $9 bil­lion on loan fees.

Fin­bond said it would con­tinue to ex­pand in the US, be­cause the coun­try of­fered it di­ver­si­fi­ca­tion, less po­lit­i­cal risk, an ef­fec­tive rand hedge and economies of scale.

“Fol­low­ing this strate­gic ac­qui­si­tion, Fin­bond’s North Amer­i­can Short-term Lend­ing Di­vi­sion will be ad­vanc­ing ap­prox­i­mately $260m per an­num,” Fin­bond said.

Fin­bond shares closed 2.58 per­cent higher on the JSE yes­ter­day at R3.18.

The Blake deal marks Fin­bond’s fifth ac­qui­si­tion in North Amer­ica in less than two years.

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