Within 3 months of announcing the agreement,
Encore Capital Group, Inc.
) has completed the acquisition of Michigan-based
Asset Acceptance Capital Corp.
). All the operating subsidiaries of the latter have also been
taken over by the former.
Encore Capital paid a purchase consideration of $200 million,
based on a per share value of $6.50. This amount translates into
a 24% premium on the 30-day volume-weighted average share price
of Asset Acceptance as of Mar 6, 2013, when the acquisition was
Following the acquisition of Asset Acceptance's business,
Encore Capital's tally of individual consumer accounts has
crossed the 60 million mark, with total face value exceeding $130
billion. These accounts cover credit card, telecommunications,
consumer loans and other related assets.
The acquisition has only expanded Encore Capital's portfolio,
but also enhanced its operating capacity. Moreover, the company's
low-cost platform will bring down Asset Acceptance's cost.
Encore Capital will also gain synergistic benefits due to the
unification of the businesses. Further, the combination of the
companies' platforms will provide larger amount of consumer data,
leading to a better understanding of consumer behavior, which in
turn will help Encore Capital divide consumers into more focused
segments. As a result, the company will be able to improve its
With over 50 years of experience in the field, Asset
Acceptance is proficient in acquiring consumer debt. The company
also has an experienced workforce, which will add to Encore
Capital's proficiency. Asset Acceptance's strong internal legal
group should also help in the faster achievement of Encore
Capital's legal plans.
Encore Capital has an active inorganic growth strategy. It
regularly acquires portfolios of competitors to expand its
business and strengthen its position in the industry. The company
recently started expanding internationally by inking an agreement
to acquire a stake in an Ireland-based company.
The shares of Encore Capital have surged 24% since the
acquisition was announced. This includes the optimism over the
synergies from the acquisitions as well as the company's strong
first quarter earnings. Going ahead, we expect the share price to
trend higher, reflecting Encore Capital's strong operational
Encore Capital carries a Zacks Rank #3 (Hold), while Asset
Acceptance carries a Zacks Rank #4 (Sell). Other companies in the
financial sector worth considering are
Regional Management Corp.
) - Zacks Rank #1 (Strong Buy) - and
Discover Financial Services
) - Zacks Rank #2 (Buy).
DISCOVER FIN SV (DFS): Free Stock Analysis
ENCORE CAP GRP (ECPG): Free Stock Analysis
REGIONAL MANAGE (RM): Free Stock Analysis
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