Associates Buying Canadian Finance Unit from Beneficial
Timmons, Heather, American Banker
Associates First Capital Corp. said Tuesday that it has an agreement to buy the Canadian consumer finance arm of Beneficial Corp., a move that will make it the largest foreign-owned consumer finance company in Canada.
Terms of the deal were not disclosed, but analysts estimated that Dallas-based Associates paid about a 25% premium for Beneficial Canada's operations.
Wilmington, Del.-based Beneficial expects to record a net after-tax gain of more than $100 million for this quarter, versus a loss of $12.8 million the quarter before, the company said.
Beneficial Canada has 105 offices and a $767 million portfolio that include mortgages, personal loans, private-label credit cards, and sales finance receivables.
Analysts applauded the move, saying that Associates should be able to wring efficiencies out of Beneficial's operations.
The company will be able to profitably manage the branches "not by cutting expenses but by pushing through their corporate culture," said Katrina Blecher, analyst with Gruntal Securities. "They have a low-cost structure, because of their ability to centralize and strong underwriting capabilities."
In addition, Associates can translate relationships with Beneficial customers into high-ticket home equity loans, she said.
Adding Beneficial's subsidiary will increase Associates' Canadian presence to 240 offices and portfolio to $1.95 billion.
"Beneficial has a branch distribution network that serves consumers in all 10 provinces. Its diverse portfolio and emphasis on quality customer service fit well with our existing consumer and commercial finance operations in Canada," Keith W. Hughes, Associates chairman and chief executive officer, said in a prepared statement.
"Beneficial has experienced management and an excellent employee base that we are pleased to welcome to our organization," Mr. Hughes said.
Once the transaction closes, about half of Associates' business there would be consumer finance, with commercial financing and leasing making up the remainder, a spokesman said. …