CURO Buys One Business, Sells Another

Consumer lending company CURO Group Holdings Corp. (NYSE: CURO) has entered into two deals on May 19. Specifically, it will sell its legacy U.S. direct lending business to consumer financial services company Community Choice Financial for $345 million in cash; it will also acquire near-prime installment loan consumer lender First Heritage Credit for $140 million in cash.

For the deal with Community Choice Financial, the purchase price is $310 million with an additional $35 million payable over 12 months under a transition services agreement pursuant to which CURO will provide Community Choice Financial with certain transition services. Therefore, the total compensation is worth $345 million. There is also a $1.73 million indemnity cap, which represents 0.5% of the transaction value.

In regards to the acquisition of First Heritage Credit, there is a $7.5 million indemnity cap, which represents 5.36% of the transaction value.

“In late 2021, we acquired Heights Finance, a leading near-prime installment lender, signifying our entry into this broader consumer lending market in the U.S.,” Don Gayhardt, Chief Executive Officer of CURO, said in a press release. “Continuing on that strategic shift, today we are announcing that we are selling our legacy storefronts and online businesses in the U.S., which operate under the Speedy Cash, Rapid Cash and Avo Credit brands, and we are purchasing a U.S. based near-prime installment lender, First Heritage Credit. Together, these transactions completely transform our U.S. direct lending business to a near-prime installment lender offering larger loans. These three transactions have strategically recast our U.S. direct lending business in less than a year’s time.”

According to the filings, these deals help to further advance CURO’s strategy to transition to “longer term, higher balance and lower rate credit products.” These transactions will also help to simplify and improve the predictability of CURO’s business while improving and expanding access to lower cost debt capital and focusing its money on higher-growth, durable business lines.

Both transactions have been approved by each companies’ respective board of directors. The deals are expected to close within 45 days from the announcement on May 15, which is by early Q3 2022.

For both deals, CURO’s legal counsel is King & Spalding LLP and its financial advisor is Jeffries LLC. Community Choice Financial’s legal counsel is Morrison & Foerster LLP and its financial advisor is Stephens Inc. Meanwhile, First Heritage Credit’s legal counsel is Butler Snow and its financial advisor is Stephens Inc.

Prior to the announcement, CURO’s stock was valued at $8.09 on May 18. When the deals were announced on May 19, the stock closed at $8.75. A few days later, on May 24, the stock was valued at $8.32.