First CashFinancial Services Inc. and CashAmerica International Inc. agreed to combine in a tax free,all-stock transaction.
The pro forma market value of equity of the transaction isvalued at approximately $2.4 billion, based on the current shares outstandingand the closing stock price on April 27 for both companies.
The combined company will be named FirstCash and will be headquarteredin Fort Worth, Texas. It will have operations in four countries, includingalmost 1,200 stores in the U.S., and 936 Latin American locations that willrepresent 45% of its stores. The majority of new store growth is expected to bein Latin American markets. On a pro forma basis, FirstCash would havefirst-quarter last-12-month revenues of approximately $1.75 billion. Pawnoperations will continue to be the primary focus of the combined company, with94% of its expected revenue mix coming from pawn-related merchandise sales andpawn service fees.
FirstCash's leadership team will include Cash AmericaExecutive Chairman Dan Feehan as nonexecutive chairman; First Cash FinancialChairman and CEO Rick Wessel as vice chairman and CEO; Cash America Presidentand CEO Brent Stuart as president and COO; and First Cash Financial ExecutiveVice President and CFO Doug Orr as executive vice president and CFO.
The combined company's board will be composed of sevendirectors, three of whom will be designated by First Cash Financial, three byCash America and a former First Cash Financial director endorsed by CashAmerica.
The combination is expected to generate approximately $50million of annual runrate synergies within the first 24 months after theclosing of the transaction, primarily from efficiencies related to technologyplatforms, finance and reporting functions and other administrative functions.
The transaction would be 10% accretive to First CashFinancial's expected EPS in 2017 and 35% accretive to Cash America's expected2017 earnings per share.
FirstCash intends to return capital to shareholders viaquarterly cash dividend payments and stock buybacks. While subject to theapproval of the combined company's board, it is expected that the new companywill pay an annual cash dividend of 76 cents per share, paid quarterly.
Under the terms of the agreement, Cash America shareholderswill receive a fixed exchange ratio of 0.84 First Cash Financial shares foreach Cash America share they own. Following deal completion, First CashFinancial shareholders will own approximately 58% of the combined company, andCash America shareholders will own approximately 42%.
Pending completion of the transaction, both companies expectto continue to pay quarterly cash dividends under each company's existingdividend policy and respective stock repurchase programs will be suspended.
The transaction is expected to close in the second half of2016, subject to the satisfaction of customary closing conditions, theexpiration or termination of the applicable Hart-Scott-Rodino waiting periodand approvals by the shareholders of both the companies.
Credit Suisse is serving as lead financial adviser to FirstCash Financial with Comstock Capital & Advisory Group LLC and Pi CapitalInternational LLC also serving as financial advisers. Alston & Bird LLP isserving as legal counsel to First Cash Financial. Jefferies LLC is serving asexclusive financial adviser, and Hunton & Williams LLP is acting as legalcounsel to Cash America.