Axis Auto Finance Inc. has agreed to acquire Newmarket, Ontario-based subprime automotive finance company Cars on Credit Financial Inc. for about C$11 million in cash.
The deal value is subject to possible downward adjustments with respect to book value on the close of the transaction and losses on the 2017 vintage of receivables. The transaction will more than double Axis' portfolio to nearly C$60 million and is expected to be immediately accretive to Axis' adjusted earnings and on a price-to-book basis. As of Sept. 30, Cars on Credit had finance receivables totaling about C$32 million. As part of the deal, two securitization facilities with Canadian banks will be assumed.
The deal is expected to close on or about Jan. 31, 2018.
INFOR Financial was financial adviser and Dentons Canada LLP was legal counsel to Axis.
Axis plans to fund the transaction through a private placement of about C$15 million of subscription receipts, co-led by Canaccord Genuity Corp. and INFOR Financial Inc. and including PI Financial Corp. and Raymond James Ltd.
Axis plans to sell 21,428,600 subscription receipts at 70 Canadian cents apiece for gross proceeds of about C$15 million. The agents have been granted an option, exercisable in whole or in part at the offer price not later than the earlier of 48 hours prior to closing of the subscription receipt offering, to buy up to 3,214,300 more subscription receipts at 70 cents apiece for up to about C$2.3 million.
The offering is scheduled to close on or about Jan. 16, 2018. Each receipt will entitle the holder to receive one unit which consists of one Axis common share and a half common share purchase warrant. Each whole warrant will entitle the holder to buy an Axis common share at any time after the deal closure at 90 cents for 36 months following the closing date of the offering.
