Banco Santander of Spain, parent company of Dallas-based Santander Consumer USA, has agreed to acquire the Canadian business of auto financing company Carfinco for CAD $298 million (Canadian), or about USD $270 million (U.S.).
Carfinco, which is based in Edmonton, Alberta, is one of the main auto financing companies in Canada, operating in all 10 Canadian provinces. Its products are distributed through a network of 2,200 dealers.
The company has a geographically diverse loan portfolio of CAD $278 million, which is about $250 million in U.S. dollars. Carfinco had 29,500 customers as of June.
“We are excited to sign this agreement with Carfinco, which allows us to enter a market with good growth potential such as Canada, where we hope to reach agreements with other car manufacturers like those we have signed in other countries,” said Juan Rodriguez Inciarte of Banco Santander.
Santander will pay CAD $11.25 in cash per share, representing a premium to shareholders of 32 percent above the volume-weighted average price over the last 90 trading days. As part of the agreement, Carfinco will also pay a special dividend to shareholders on the closing date. The amount of the special dividend will be determined closer to the closing date and is subject to necessary approvals.
“We are delighted with the value this all-cash offer of $11.25 per share brings to our shareholders and this agreement with one of the top banks in the world, which will bring to the Canadian market their knowledge, experience and relationships in the auto finance industry,” said Tracy Graf, president and CEO of Carfinco. Carfinco’s board of directors has approved the transaction and will recommend that shareholders vote in favor. The transaction remains subject to regulatory approvals.
Under the transaction, a new company will be formed in which Santander will own approximately 95 percent of the equity, while top management of Carfinco, including the president and CEO, will retain the remaining 5 percent and will maintain their management roles. Graf and other key executives will bring to Santander their experience and knowledge of the Canadian market to contribute to the future growth of the company, which registered an attributable profit of CAD $20.2 million in 2013.
Santander has a presence in the United States, Europe and Latin American countries including Brazil, Chile and Peru. Santander Consumer USA has a portfolio of more than USD $20 billion and distributes its products through 14,000 dealers in the United States.