Credit lender International Personal Finance (IPF) is to buy specialist lending firm MCB Finance for £24m in a deal that will give it access to new markets in Finland, Latvia, Estonia and Australia.
Leeds-based IPF said that MCB, which provides unsecured consumer loans and credit lines of up to €3,000 (£2,354), will benefit from being owned by a well capitalised and funded parent.
The MCB directors said they will unanimously recommend the deal to shareholders and the MCB management team will stay on with the company.
Analyst Gary Greenwood at Shore Capital said: “Overall, this is a relatively small acquisition that fits in with the company’s strategy to broaden its product range and geographic reach. We do not expect it to have a material impact on our estimates for the IPF group, which we leave unchanged.“
IPF’s cash offer for MCB is at 125p per share, which values the entire business at £23.8m.
“The offer represents a pretty punchy, in our view, 50 per cent premium to Thursday’s closing price and a 138 per cent premium to the closing price of 52.5p on November 17, being the last day prior to the offer period commencing,” said Mr Greenwood.
MCB is a specialist lending company operating in the Fenno-Baltic region (Finland, Latvia, Estonia, Lithuania) and Australia under the Credit24 brand.
“The transaction will give IPF access to four new markets (it currently only operates in Lithuania) while also enhancing its digital product offering,” said Mr Greenwood.
In the nine months to the end of September MCB generated £21m of revenue and £940,000 of adjusted pre-tax profit. Mr Greenwood said that on this basis, IPF is paying a price/sales multiple of almost one times and a PER of almost 40 times.
“To justify these multiples we assume that IPF management must be very confident of delivering significant synergies, which we assume will come from its ability to leverage IPF’s stronger balance sheet,” he said.
Gerard Ryan, chief executive of IPF, said: “MCB brings new digital products, distribution channels and an experienced management team, all of which complement IPF’s existing business.”