When they start leasing cars it will go nuts. Many of us have been in IGSS for 2 or more yrs, and are not going to give our shares away on the first run. This campany has a small float and should move up fast on news of sales. There was a major seller but it looks like he is gone ( his mistake ).Here is a read on a subprime leander that just got bought out also based in Toronto Canada.
TD Bank to buy non-prime auto lender VFC Inc. in $326-million deal
Related Symbols: T.TD
2/16/06 12:46:00 PM
TORONTO (CP) - TD Bank Financial Group (TSX:TD) is jumping into the business of making high-interest loans to used-car buyers with dodgy credit ratings by taking over VFC Inc. (TSX:VFC) for $326 million.
TD and VFC announced Thursday that TD is offering $19.50 per share for VFC, whose stock had closed Wednesday at $14.15.
"This acquisition is a logical extension of our existing business as a leader in dealer-based automobile financing and an opportunity for us to increase our range of product offerings in response to what dealers and their customers have said they want," stated Tim Hockey, head of TD's personal banking group.
So-called non-prime consumer lending is "an underserved market segment with significant growth opportunity," Hockey said, telling an investor conference call that the high-risk loan segment "will grow faster than the traditional consumer lending market will, and we want to be at the table."
Charles Stewart, president and CEO of Toronto-headquartered VFC, cited "potential synergies of the two organizations, particularly with regard to referrals and distribution," and observed that the TD bid "represents an attractive value proposition for our shareholders."
VFC shares jumped $5.15 or 36 per cent to $19.30. The company, founded in 1994, went public in October 2003 at $6.50 per share - exactly one-third of TD's offer price.
VFC, with offices in Toronto, Montreal and Nanaimo, B.C., has 220 employees and $380 million in receivables from more than 25,000 customers lined up through relationships with 2,000 car dealers.
Auto loans are 95 per cent of its portfolio and Stewart said 95 per cent of these loans are for used vehicles, typically two to four years old, with about half of the transactions originating from new-car franchised dealers and half from independents.
VFC will continue under its own brand and management and Stewart said he and other top executives are committed to stay with the company for at least three years.
VFC stockholders have the option of taking $19.50 per share in cash or $19.45 per share in TD common stock plus a nickel per share in cash.
The offer is endorsed by the VFC board, and management and other shareholders owning 29 per cent of the company have entered into lockup agreements to tender their stock.
Among those shareholders is Manulife Financial Corp. (TSX:MFC).
The arrangement includes a $9.25-million break fee if VFC reverses its acceptance.
VFC connects to dealers via the Internet and Stewart said it turns around loan decisions within 10 minutes using a combination of computerized screening and human decision-making.
Last month it struck a deal with Chrysler Financial under which customers who don't qualify for loans from the automaker are automatically forwarded to VFC.
TD's Hockey said VFC will look at all car-loan applications that TD's standard lending operation turns down, and "a broader non-prime lending strategy . . . is something we'll keep open."
VFC earned $3.5 million on revenue of $20.4 million in its latest reported quarter, up from $2.2 million on $15.2 million a year earlier.
Colleen Johnston, TD's chief financial officer, said VFC's business is forecast to grow at 20 per cent or more annually "before the benefit of referrals from TD." The bank expects the transaction to start adding to its earnings next year.
Dominion Bond Rating Service observed that keeping VFC as a separate brand will "clearly delineate between the higher-risk lending operations and TD's own lower-risk prime auto lending business."
VFC's business - lending to people who have undergone financial problems, have brief credit histories, or are self-employed - provides high interest margins but also high loan losses, DBRS analysts Robert Long and Brenda Lum noted.
"While the portfolio is higher-risk in nature, associated credit risks are manageable," they added, estimating that VFC's portfolio amounts to only 0.2 per cent of TD's total consumer loans.
VFC's Stewart told analysts - who congratulated him on a great deal for his shareholders - that the company has "always been constrained by the cost of capital," which will be reduced as a unit of TD, likely by two or three percentage points, analysts estimated.
But Stewart said VFC's pricing and risk strategies will not change.
© The Canadian Press, 2005
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