Arrow Global To Acquire Capquest For GBP158 Million

LONDON (Alliance News) - Arrow Global Group PLC Wednesday said it is to acquire Capquest, a UK ...

Alliance News 24 September, 2014 | 8:13AM
Email Form

LONDON (Alliance News) - Arrow Global Group PLC Wednesday said it is to acquire Capquest, a UK consumer-debt purchaser and outsourced collections provider, for GBP158.0 million on an enterprise value basis, in a move designed to reinforce its position in European debt purchase and management.

In a statement, Arrow Global said that Capquest, which it is acquiring from a fund controlled by TowerBrook Capital Partners LP, will create a European debt purchase and debt management business with GBP15.4 billion in combined receivables under management by face value - GBP12.4 billion of which are owned.

The move will also combine Arrow Global's 5.4 million owned customer account records with Capquest's 2.8 million owned customer accounts. As a consequence, Arrow Global said the combination of those account records will help with underwriting.

Arrow Global added that the deal is in line with its strategy of diversification due to Capquest's presence in the motor finance sector, as well as its "established capability to collect high volume low balance accounts."

"Bringing together Capquest's customer-focused in-house collection capabilities with Arrow Global's data-driven master servicing model is an important step in achieving our vision. It adds a significant portfolio of assets at attractive returns, supports our broad range of origination sources and extends our reach into new asset classes. We expect the deal to be strongly earnings per share (EPS) accretive and return on equity (ROE) enhancing from 2016, and to be moderately ROE and EPS accretive in 2015 as we integrate the two businesses," Arrow Global Chief Executive Tom Drury said in a statement.

The deal is being financed through cash and debt, with committed bridge financing from Goldman Sachs. Upon completion of the acquisition, the total commitments under Arrow Global's revolving credit facility will be increased to GBP100.0 million from GBP82.5 million. The increase in the size of the revolving credit facility will also provide additional capacity for further portfolio purchases, Arrow Global said.

Following the acquisition, Capquest Chief Executive Helen Ashton, who was appointed to the role following the company's acquisition by private equity firm TowerBrook in 2011, will join Arrow Global's senior management team.

According to Arrow Global Capquest made a GBP21.5 million pretax loss, including non-recurring items, in the 12 months ended June 30. It has gross assets of GBP157.7 million. Loss before interest and tax, including non-recurring items, was GBP1.9 million. Arrow Global said interest expense included non-cash interest expense on shareholder loan notes which will be repaid as part of the acquisition.

Both the Arrow Global and Capquest brands will be retained.

Arrow Global shares were early Wednesday quoted up 4.0% at 261.00 pence.

By Samuel Agini; samagini@alliancenews.com; @samuelagini

Copyright 2014 Alliance News Limited. All Rights Reserved.

Email Form
Securities Mentioned in Article
Security Name Price Change (%) Morningstar
Rating
Arrow Global Group PLC 212.50 GBX -4.06 -
About Author Alliance News

Alliance News provides Morningstar with continuously updating coverage of news affecting listed companies.