Consumer loan company CURO Group Holdings Corp. (NYSE: CURO) reached two agreements on May 19. More specifically, it to sell its former U.S. direct lending business to consumer financial services company Community Choice Financial for $345 million in cash; I am fine too acquire prime installment loan consumer lender First Heritage Credit for $140 million in cash.
For the agreement with Community Choice Financial, the purchase price is $310 million, plus an additional $35 million payable over 12 months under a transition services agreement under which CURO will provide Community Choice Financial some transitional services. Therefore, the total compensation is worth $345 million. There is also a compensation cap of $1.73 million, which is 0.5% of the transaction value.
With respect to the acquisition of First Heritage Credit, there is a compensation cap of $7.5 million, which represents 5.36% of the value of the transaction.
“At the end of 2021, we acquired Heights Finance, a leading, prime installment lender, which signifies our entry into this broader consumer lending market in the United States,” said Don Gayhardt, CEO of CURO, in a press release. “Continuing this strategic shift, today we are announcing that we are selling our former US storefronts and online businesses, which operate under the Speedy Cash, Rapid Cash and Avo Credit brands, and are buying a near-premium installment based lender, First Heritage Credit. Together, these transactions completely transform our direct lending business in the U.S. into a premier installment lender offering larger loans. These three transactions have strategically overhauled our lending business direct to the United States in less than a year.
According to the filings, these agreements help advance CURO’s strategy to transition to “longer-term, higher-balance, lower-rate credit products.” These transactions will also help simplify and improve the predictability of CURO’s business while improving and expanding access to lower-cost debt capital and focusing its money on higher-growth sustainable business areas.
Both transactions have been approved by the respective board of directors of each company. The deals are expected to close within 45 days of the May 15 announcement, early in the third quarter of 2022.
For both transactions, CURO’s legal counsel is King & Spalding LLP and his financial adviser is Jeffries LLC. Community Choice Financial’s legal counsel is Morrison & Foerster LLP and his financial adviser is Stephens Inc.. Meanwhile, First Heritage Credit’s legal counsel is Snow Butler and his financial adviser is Stephens Inc..
Prior to the announcement, CURO shares were valued at $8.09 on May 18. When the trades were announced on May 19, shares closed at $8.75. A few days later, on May 24, the stock was valued at $8.32.