DFC Global Corp
) will be taken over by an affiliate of Lone Star Funds for $1.3
billion. Following the announcement, shares of the diversified
financial service provider increased 5.23% to close at $9.45
Though DFC Global's board of directors approves the buyout, it
requires the affirmative vote of the holders of a majority of the
outstanding shares. The approval will be sought at a special
meeting of stockholders. The acquisition is expected to see light
in the third quarter of the current year. Following the closing
of the deal, DFC Global will become a privately held company.
The purchase consideration of $1.3 billion, which includes
assumption net debt, translates into $9.50 in cash for each share
of DFC Global's common stock. The purchase price per share
represents a 5.8% premium on the closing price on April 1, 2014,
and a 12.3% premium to DFC Global's 30-day volume weighted
average stock price for the period ended April 1, 2014.
Formerly known as Dollar Financial Corporation, DFC Global was
founded in 1990 and is headquartered in Berwyn, PA. DFC Global
provides a range of consumer financial products and services to
under-banked consumers. DFC Global had a network of 1,532 stores
(of which 1,522 are company-owned) located in the U.S., Canada,
UK, the Republic of Ireland, Sweden, Finland, Spain, Poland and
the Czech Republic.
The acquisition comes with immediate cash value to DFC Global's
shareholders. DF Global expects to capitalize on Lone Star's
broad-based financial and retail expertise to provide enhanced
service to its customers.
Of late, DFC Global has been facing headwinds in its U.K.
operations. Due to new loan rollover limitations (three loan
rollovers per customer), several outstanding short-term consumer
loans in the U.K. became immediately due, resulting in a
temporary 'credit crunch' for the customers. As a result, the
company is facing more loan defaults in its U.K. business, which
in turn is weighing on its earnings. In anticipation of the
increasing number of loan defaults, DFC Global constricted the
lending-underwriting norms, which again is weighing on loan
growth in U.K. Additionally, the company expects to incur
expenses in the range of $10.0 million-$15.0 million to support
ongoing regulatory-related activities, including regulatory
advisory costs, legal opinions and analysis, and audit and
regulatory compliance costs in fiscal 2014.
In a separate development, DFC Global further slashed its fiscal
2014 expectation to account for effects of the transition in the
U.K. to a new regulatory environment, continued unfavorable
trends in the value of the Canadian dollar with respect to the
U.S. currency, and decline in gold commodity prices. It now
expects operating earnings per share between 4 and 12 cents, down
from the previous guidance of 35-80 cents per share. The Zacks
Consensus Estimate is currently pegged at 43 cents. We expect the
number to tumble as analysts revise their estimate in the light
of lowered guidance. Adjusted EBITDA is also trimmed to a range
of $151.0 to $156.0 million, from $170.0 million to $200.0
million guided earlier. During its fiscal second-quarter earnings
release as well, DFC Global had lowered its fiscal 2014 guidance.
Alongside, the company expects to generate revenues in the in the
range of $248.0 to $252.0 million and adjusted EBITDA in the
range of $34.0 to $36.0 million in the third quarter of fiscal
2014. The company estimates third-quarter bottom line to be
between loss of 4 cents and breakeven. The Zacks Consensus
Estimate for the quarter is pegged at 9 cents.
DFC Global currently carries a Zacks Rank #4 (Sell).
Better-ranked stocks worth considering are
Apollo Residential Mortgage, Inc
Euronet Worldwide Inc
Portfolio Recovery Associates Inc
). While Apollo Residential and Euronet Worldwide sport a Zacks
Rank #1 (Strong Buy), Portfolio Recovery carries a Zacks Rank #2
APOLLO RES MTGE (AMTG): Free Stock Analysis
DFC GLOBAL CORP (DLLR): Free Stock Analysis
EURONET WORLDWD (EEFT): Free Stock Analysis
PORTFOLIO RCVRY (PRAA): Free Stock Analysis
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