ECN Capital announced that it has entered into a definitive agreement to acquire Service Finance Holdings, LLC ("Service Finance"). Under the terms of the agreement, ECN Capital will pay C$410 million (US$304 million) in cash for Service Finance. In addition, ECN Capital has agreed to a deferred purchase price earn-out plan with the founders that will be based on the achievement of prescribed return on average equity (ROAE) over the next 5 years.
Founded in 2004, Service Finance originates and services prime and super-prime installment contracts to finance home improvement projects in the U.S. Originations are sourced through exclusive national vendor programs with top manufacturers and dealers.
"In over 25 years I have not encountered a business model like Service Finance with leading vendor finance relationships, superior credit, proven growth, scalability, and a robust partnership with U.S. banks," said Steven Hudson, ECN Capital's CEO. "Mark, Steve, Ian and Eric and their team need to be commended for the dominant business that they have built. We'd also like to recognize the role of Flexpoint Ford as an owner and advisor. We look forward to a long-term partnership with Mark and his team", added Mr. Hudson.
On a pro forma basis, the acquisition will be immediately accretive to adjusted earnings per share (EPS) and return on equity (ROE) in 2017 and beyond. "The Service Finance acquisition continues ECN Capital's strategic redeployment of capital and is a significant step to becoming a high return originator and asset manager", said Steven Hudson.
As part of the transaction, ECN Capital will acquire the employees, systems, intellectual property, operations, offices, agreements, and other assets of Service Finance.
The transaction, which is expected to close in the third quarter of 2017, is subject to customary closing conditions, including regulatory approvals.
BMO Capital Markets, CIBC Capital Markets and Macquarie Capital acted as financial advisors to ECN Capital in connection with the transaction. Baker & Hostetler LLP acted as legal counsel to ECN Capital.