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Acquisition of 50% of Americash Holding LLC and Creditbox.com LLC
Finbond Group Limited
(Registration number: 2001/015761/06)
Share code: FGL ISIN: ZAE000138095
(“Finbond” or “the Company” or “the Group”)
ACQUISITION OF 50% of AMERICASH HOLDING LLC and CREDITBOX.COM LLC
1. Introduction
Finbond shareholders are advised that as part of the Company’s earnings
enhancing growth strategy in terms of which Finbond expanded its short-term
lending business into the North American market Finbond entered into an
agreement to acquire 50% of Americash Holding LLC and Creditbox.com LLC
(“Americash”) with an option to acquire the remaining 50% by 1 October 2017
(“Americash Transaction”).
Americash has a dominant market position in the City of Chicago and offers
short-term instalment loans (with an average tenure of 4 months) through its 67
brick-and-mortar locations in Illinois, Wisconsin, Missouri, Oklahoma and South
Carolina and online through its Fintec offering Creditbox.com in the states of
Illinois, Wisconsin, Missouri, New Mexico, Utah, and Nevada via the
Creditbox.com website.
Following the Americash Transaction, approximately 60% - 70% of Finbond’s net
earnings will be denominated in US$ within 12 months of the effective date and
the intention is to grow US$ earnings to approximately 80% - 90% of net earnings
in 3 to 5 years.
2. Nature of Finbond Business and Rationale for the Americash Transaction
Finbond is a leading South African financial services institution that
specialises in the design and delivery of unique value and solution based short-
term credit products tailored to borrower requirements rather than
institutionalised policies and practices.
Finbond conducts its business through two major divisions focussed on:
1.) Short-Term Unsecured Credit Products; and
2.) Investment and Savings Products.
Finbond’s Short-Term Unsecured Lending division operates nationally through 379
branches in South Africa.
The Americash Transaction expands Finbond’s North American branch network to
178 with a presence in the states of Illinois, Wisconsin, Missouri, Oklahoma
and South Carolina, New Mexico, Utah and Nevada in addition to the states of
Louisiana, Mississippi, California, Indiana, Alabama and Florida where Finbond
already operates. Following this strategic acquisition Finbond’s North American
Short-Term Micro Credit Division will be advancing approximately US$210 million
(R3 billion) per annum.
The rationale for Finbond’s continued expansion in the United States of America
(“US”) includes:
- Earnings enhancing growth.
- Significant growth and consolidation opportunity in the US Alternative
Financial Services industry.
- Organic growth in Finbond’s core “short-term lending” competency.
- Diversification of country and political risk.
- Effective ZAR hedge. Approximately 60% -70% of earnings will be in US
dollars 12 months after the effective date of the acquisition.
- Economies of scale.
- Teaming up with US owner-managers with 20 years’ experience operating a
short-term unsecured lending business in the United States of America.
3. The Americash Transaction
3.1. Nature of business
Americash is a US based short-term instalment lender that specialises
in the design and delivery of unique value and solution based short-
term, unsecured consumer instalment loans tailored around borrower
requirements rather than institutionalised lending policies.
Americash conducts its business through two divisions:
1. Americash Holding LLC; and
2. Creditbox.com LLC.
Americash with its 260 personnel, has a dominant market position in
the City of Chicago and offers short-term instalment loans through
its 67 brick-and-mortar locations in Illinois, Wisconsin, Missouri,
Oklahoma and South Carolina.
Creditbox.com LLC is Americash’s Fintech online offering that offers
instalment loans in the states of Illinois, Wisconsin, Missouri, New
Mexico, Utah, and Nevada via the Creditbox.com website allowing the
company to service those customers not in close physical proximity to
a retail location or those that prefer the privacy and security of
their own homes.
Americash was founded in 1997 by Mr. Dustin Mauldin in Des Plaines,
Illinois and has emerged as one of the Midwest’s leading and fastest
growing providers of unique instalment related finance solutions. The
catalyst for the Group’s growth has been the identification of the
need in the US Alternative Financial Services market for innovative
lending products and services. Americash has a loyal customer base
consisting of more than 142,000 customers across multiple states. In
2015, the Company extended more than 72,000 loans totalling over $61
million (R887 million) in principal, with an average loan amount of
approximately $847 (R12,315) and collected $101 million (R1,469
million) cash from customers.
Americash’s key strengths inter alia include:
• experienced directors and senior management with extensive
experience in the US Alternative Financial Services Market;
• dominant Chicago and Midwest market position with various state and
metropolitan licenses;
• a proven and scalable online Fintech offering;
• loyal repeat customer base;
• focussed cash generative short-term instalment loan products;
• well-developed information technology infrastructure and
proprietary software;
• conservative upfront credit scoring methodologies;
• efficient collection capabilities;
• proven ability to steer through regulatory changes; and
• proven ability to acquire, integrate and consolidate companies in
its market.
Americash’s management has a long and successful track record within
the Alternative Financial Services sector in the US. This, combined
with well-developed systems, unique branded product offerings, advanced
information technology and a well-trained and motivated staff
complement, provide Americash with a competitive advantage for
achieving its vision of being the leading provider of alternative
consumer finance products in the Midwest, with plans for expansion
nationwide in the retail and online settings.
3.2. Salient features
The salient features of the Americash Transaction are as follows:
- The purchase consideration payable by Finbond to the vendor is
US$37.5 million (R545.3 million) for 50% of the shares on Americash
Holding LLC and Creditbox.com LLC.
- Finbond has an option to acquire the remaining 50% of Americash by
1 October 2017.
- The vendors provided a profit warranty to achieve Earnings before
interest, tax, depreciation and amortisation (“EBITDA”) of US$13
million (R189 million) for the year ending 31 August 2017.
- 100% of the purchase consideration set out above will be payable
in cash on the closing date of the transaction.
- The vendors in respect of the Americash Transaction are David H.
Barr Trust, Bonnie J. Schoenberg Trust, Steven M.Schoemberg Trust,
Arnold S. Horwich Trust, S Corporation Trust of Anthony J.
Fornelli, Ontario Trust and Dustin Mauldin Revocable Trust.
- The effective date of the Americash Transaction is 1 September
2016.
- The net asset value and net after tax profit of the subject of the
transaction amounted to US$22.2 million (R321.9 million) and US$10.9
million (R157.3 million) respectively, based on the audited results
for the year ended 31 December 2015.
3.3. Conditions precedent
The Americash Transaction remains subject to the following conditions
precedent:
- Signature of an Operating Agreement.
- Submitting all US regulatory license applications that are
required.
4. Shareholder Loans and Fully Underwritten Rights Offer
Finbond intends to raise the requisite capital to fund this acquisition from
its shareholders by means of a Rights Offer that will take place between
November 2016 and February 2017.
In order to fund the purchase consideration in respect of the acquisition,
that is due and payable in the course of October 2016 Finbond’s three major
shareholders Riskowitz Value Fund LP [“Riskowitz”], Net1 Finance Holdings
(Pty) Ltd [“Net 1”] and Finbond Chief Executive Officer, Dr Willie van Aardt
through Kings Reign Investments (Pty) Ltd (“KRI”) extended unsecured
shareholder loans to Finbond to the value of US$37.5 million as follows:
- Riskowitz Value Fund LP U$17.5 million(R254.5 million)
- Net1 Finance Holdings (Pty) Ltd U$10 million (R145.4 million)
- Kings Reign Investments (Pty) Ltd U$10 million (R145.4 million)
In terms of the Shareholders Loan Agreement, Finbond Group Limited (“The
Borrower”) and the above shareholders agreed inter-alia that:
- The Rights Offer Date will be the last day that any of the Borrower’s
shareholders shall be entitled to follow its rights in terms of the
Rights Offer.
- The interest rate for the shareholders loans will be LIBOR plus 10%.
- The shareholder loans will be repaid on the earlier of:
o The date on which Riskowitz, Net1 and KRI follow their rights in
terms of the Rights Offer and the Borrower procures that the Rights
Offer Shares are issued in favour of Riskowitz, KRI and Net1
(proportionate to their shareholding); or
o 28 February 2017 or such date as may be mutually agreed upon.
- As soon as practically possible after the signature date, the Borrower
shall use its best endeavours to proceed with the rights offer.
- On the Rights Offer Date Riskowitz, KRI, Net1 irrevocably undertake:
o to follow their rights and to take up such proportion of the rights
offer shares as they may be entitled to in terms of their existing
shareholding;
o in the case of Riskowitz, to underwrite the balance of the rights
offer shares not taken up by the remaining shareholders in the
Borrower, provided that such underwriting shall be subject to the
terms of an underwriting agreement to be concluded;
o in the case of Net1 and KRI, to vote against the delisting of the
Borrower in the event that a mandatory offer to minorities is
triggered by Riskowitz’s increased shareholding and that Net1 and
KRI waive their rights to sell shares to Riskowitz in the event of
such a mandatory offer; and
o that all parties, including the Borrower, will take all steps
necessary to obtain a waiver, in the required form, of a mandatory
offer otherwise required to be made by Riskowitz under any
circumstances.
The Borrower irrevocably undertakes, in favor of Riskowitz, KRI and Net1
(and in proportion to their respective shareholding in the Borrower), to
procure that the Shareholder’s Loans be appropriated towards settling
Riskowitz's, KRI's and Net1’s respective financial obligations in terms of
their undertakings and to issue the rights offer shares to Riskowitz, KRI
and Net1, proportionate to their existing shareholding on the rights offer
date. Finbond will in due course commence the process of obtaining the
required regulatory approvals for the proposed rights offer and the details
and salient dates relating thereto will be announced on SENS in due course.
5. Categorisation of the Americash Transaction
The Americash Transaction is categorised as a Category 2 transactions in
terms of the JSE Limited Listings Requirements. The constitutional documents
of Americash have been reviewed and does not conflict with Finbond’s
obligations in terms of compliance with the JSE Listing Requirements.
Pretoria
20 October 2016
Sponsor and Corporate Adviser:
Grindrod Bank Limited
Date: 20/10/2016 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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