Finbond grows footprint in US

Buys lender Blake Enterprises for $9.6m

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.