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Encore to Widen International Presence with Baycorp Buyout

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Encore Capital GroupECPG has agreed to take over a majority stake in Australasia-based Baycorp. With 50.25% ownership in Baycorp, Encore will not only widen its presence in Australia and New Zealand but will also operate in a total of 13 countries. Encore had made acquisitions in Europe and Latin America earlier to expand its global presence.

With more than 5,600 employees, EncoreCapital, a specialty finance company providing debt recovery solutions, collected above $1.6 billion in 2014. Baycorp stands to benefit from Encore's skill and expertise and can hence position itself as one of premier debt resolution providers there. Merging with Encore will also help Baycorp to expedite growth and find a premier position in Australia with the acquirer's financial, strategic and operational support.

Now since Baycorp is an ace player in New Zealand, Encore is hopeful of solid growth opportunities that it is eyeing in the New Zealand and Australian markets. Clearly, both companies see benefits from this strategic merger.

The company noted that the Australian market sees around $330 million capital deployed in it each year, making it one-third the U.S. market in size. The capital deployment is made mostly in the consumer debt banking, energy and cable sectors. In terms of contingency collection, the overall market size is about $400 million. Moreover, management believes that this market will grow 5% annually and sees strong growth opportunities in it.

With nearly six decades of experience in providing debt recovery solutions across Australia and New Zealand, Bancorp boasts having the largest customer default database in Australasia with $118 million in estimated remaining collections. Riding on the strength of Encore's expertise and network, Baycorp seeks competitive advantages from the compelling offerings by the latter.

Baycorp's present owners - Oceania Capital Partners and SAS Trustee Corporation - will continue to have ownership interest, which will be lower than their current levels.

Encore has always considered prudent acquisitions that diversify and enhance its capabilities. Last August, the company acquired Atlantic Credit &Finance, a leader in collecting fresh, higher-balance accounts, for $70 million in cash. The company also purchased a majority interest in Grove Capital Management, a management company that purchases credit portfolios and has a focus on UK insolvencies and Spanish assets. Besides strengthening its operational profile these endeavors also testify to the financial strength of the company. Encore presently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Some better-ranked consumer loans providers are Springleaf Holdings, Inc. LEAF , Regional Management Corp RM and Cash America International, Inc. CSH . While Springleaf Holdings sports a Zacks Rank #1 (Strong Buy), Regional Management and Cash America International carry a Zacks Rank #2 (Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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