SOURCE: ECN Capital Corp

ECN Capital

June 08, 2017 07:00 ET

ECN Capital Signs Definitive Agreement to Acquire Service Finance Holdings

Market leading U.S. home improvement finance business

TORONTO, ON--(Marketwired - June 08, 2017) -

  • Prime and Super Prime originations through exclusive national vendor programs
  • Originations of C$1.5 Billion expected in 2018
  • Exceptional management team, led by Mark Berch
  • Immediate accretion to adjusted EPS and ROE
  • Originations purchased by FDIC insured US financial institutions and managed with no recourse

ECN Capital Corp. (TSX: ECN) ("ECN Capital" or the "Corporation"), one of North America's leading commercial finance companies, today 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.

Transaction Advisors

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.

Analyst Briefing

The Company will host an analyst briefing to discuss the transaction at 8:00 am. (Eastern Time) on Thursday June 8, 2017. Investors may access the conference call and presentation slides as outlined below:

Live Webcast  http://services.choruscall.ca/links/ecncapitalcorpannouncement1201706.html
Conference Call  North American toll-free: call 1-800-319-8560 passcode 47234 International toll-free: call the appropriate number from webpage below and enter passcode 47234 http://services.choruscall.ca/public/accessnumbers.html
Presentation Slides  Slides will be available in the webcast and at http://www.ecncapitalcorp.com/investors/presentations

The webcast will be available until September 8, 2017. A recording of the conference call may also be accessed until July 8, 2017 by dialing 1-855-669-9658 in North America or +1-604-674-8052 and entering the passcode 1485.

About ECN Capital Corp.

With total owned and managed assets of more than $4.6 billion, ECN Capital Corp. (TSX: ECN) is one of North America's leading commercial finance companies. ECN Capital operates across North America in three verticals of the commercial finance market (Rail Finance, Commercial & Vendor Finance, and Commercial Aviation Finance).

Non-IFRS Measures

The Company's audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and the accounting policies we adopted in accordance with IFRS. In this press release, management has used certain terms, including adjusted operating EPS and ROAE, which do not have a standardized meaning under IFRS and are unlikely to be comparable to similar measures presented by other organizations. The Company believes that certain Non-IFRS Measures can be useful to investors because they provide a means by which investors can evaluate the Company's underlying key drivers and operating performance of the business, exclusive of certain adjustments and activities that investors may consider to be unrelated to the underlying economic performance of the business of a given period.

Forward-looking Statements

This release includes forward-looking statements regarding ECN Capital and its business. Such statements are based on the current expectations and views of future events of ECN Capital's management. In some cases the forward-looking statements can be identified by words or phrases such as "may", "will", "expect", "plan", "anticipate", "intend", "potential", "estimate", "believe" or the negative of these terms, or other similar expressions intended to identify forward-looking statements. Forward-looking statements in this press release include those relating to the acquisition of the Service Finance business, including expected timing for closing of the acquisition, obtaining of the necessary regulatory approvals and the timing thereof, and the expected benefits and financial impact of the acquisition on ECN Capital's business, the future financial and operating performance of ECN Capital, including the expected impact on ECN Capital's EPS and originations, the strategic advantages, business plans and future opportunities of ECN Capital and the ability of ECN Capital transition to a high return originator, asset manager, and servicer of assets. The forward-looking events and circumstances discussed in this release may not occur and could differ materially as a result of known and unknown risk factors and uncertainties affecting ECN Capital, including risks regarding the equipment finance industry, economic factors, and many other factors beyond the control of ECN Capital. No forward-looking statement can be guaranteed. Forward-looking statements and information by their nature are based on assumptions and involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statement or information. Accordingly, readers should not place undue reliance on any forward-looking statements or information. A discussion of the material risks and assumptions associated with this outlook can be found in ECN Capital's Annual Information Form dated March 30, 2017 and ECN Capital's March 31, 2017 MD&A each of which has been filed on SEDAR and can be accessed at www.sedar.com. Accordingly, readers should not place undue reliance on any forward-looking statements or information. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and ECN Capital does not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.

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