Consumer Acquires 90% of U.S. Auto Financing Company Drive Financial
Wednesday March 28
MADRID, Spain, Sept. 25 /PRNewswire-FirstCall/ -- Santander Consumer has agreed to acquire 90% of U.S. auto financing company Drive Financial for $651 million (EUR 511 million), to be paid in cash.
The transaction, which will be completed in 2006 and is pending the relevant approvals, will be immediately accretive for Grupo Santander and is expected to contribute 1.5% to 2007 earnings per share. The agreed price is 6.9 times 2006 estimated earnings. The acquisition is expected to generate $540 million (EUR 424 million) in goodwill.
"This transaction represents a qualitative leap for Santander Consumer Finance. Drive is the niche leader in a business in which Santander has a solid record of success in Europe, which we will aim to repeat in the U.S., the world's largest market," said Juan Rodriguez Inciarte, head of Santander Consumer Finance. "We believe Drive is exceedingly well-positioned for growth and has excellent servicing and asset quality control platforms."
Drive Financial is one of the leading auto financing companies in the "subprime" customer segment in the United States, with 4% market share in its segment. Based in Dallas, Texas, it is present in 35 states, with approximately 50% of its activity concentrated in Texas, California, Florida and Georgia. Drive Financial has around 600 employees and its products are distributed through more than 10,000 auto dealer partnerships. As of August, Drive Financial's assets amounted to approximately $2.53 billion and its loan portfolio to approximately $2.4 billion.
Santander Consumer is acquiring the stakes of HBOS (64.5%) and the majority of the company's management stake in Drive Financial, excluding that of Thomas G. Dundon, the President and Chief Operating Officer (COO), who will retain 10%.
Santander Consumer has agreed to name Thomas G. Dundon as the company's CEO. Moreover, the parties have signed a series of options which could enable Grupo Santander to buy the additional 10% between 2009 and 2013 at prices linked to the company's earnings performance.
Under the agreement, the price paid by Santander could increase by a maximum of $175 million (EUR 137 million) if the company achieves certain earnings targets set for years 2007 and 2008.
Santander Consumer Finance, one of Grupo Santander's core businesses, is a European leader in consumer finance. Profit rose 22% in the first half of 2006 from the year-earlier half, to EUR 280 million. It manages a loan portfolio of EUR 34,477 million and deposits worth EUR 14,197 million, 29% and 7% higher, respectively, compared to June 2005. Prior to this acquisition, activity was focused on 13 European countries, in particular Spain, Germany, Italy and Poland. Santander Consumer Finance has 5,304 employees and 278 branches.
Grupo Santander (SAN.MC, STD.N) is a global financial group specializing in retail banking, consumer finance, wholesale banking, asset management and insurance. Founded in 1857, Santander has EUR 818,100 million in assets and EUR 976,500 million in managed funds, 67 million customers, 10,300 offices and a presence in 40 countries. It is the largest financial group in Spain and Latin America, and is a major player elsewhere in Europe, including the United Kingdom, through its Abbey unit, and Portugal. Through Santander Consumer Finance, it also operates a leading consumer finance franchise in Germany, Italy, Spain and ten other European countries. In the U.S., Santander has a 24.9% stake in Sovereign Bancorp., Inc. of Pennsylvania. In the first half of 2006, Santander recorded EUR 3,216 million in net attributable profits, 26% more than in the same period of the previous year.