First Cash to Buy Cash America for $994 Million in Pawn Deal

  • Combined company to operate more than 2,000 pawn shops
  • Deal to boost profit, lead to higher dividends, companies say

First Cash Financial Services Inc. agreed to buy Cash America International Inc. for about $994 million in stock in a deal to bring together two of the largest retail pawn shop operators in the U.S.

First Cash, based in Arlington, Texas, will pay 0.84 of its shares for each Cash America share, the pair said in a statement Thursday. The transaction, which the companies called a merger of equals, values Fort Worth, Texas-based Cash America at $40.90 a share, near Wednesday’s closing price of $40.70.

The combined company, to be called FirstCash, would have more than 2,000 locations in four countries, making it a powerhouse in the non-bank lending market, a catchall term for pawn brokers, check-cashing companies, payday lenders and others that provide small-dollar loans to people that live paycheck to paycheck. It’s a highly fragmented market, catering to the estimated 50 million people in the U.S. that don’t do business with traditional banks.

It would also shore up First Cash’s position in the U.S., giving it more scale to better compete against rival pawn shop operator Ezcorp Inc. and other non-bank lenders such as World Acceptance Corp. and OneMain Holdings Inc. The combined company also will have 936 locations in Latin America and focus on expanding its business there, including in Colombia and Peru, executives told analysts on a conference call.

Higher Dividend

Cash America jumped 8.7 percent $44.24 at 9:45 a.m. in New York. First Cash climbed 8.6 percent to $52.88.

The deal will add 10 percent to First Cash’s expected earnings next year and 35 percent to Cash America’s, the companies said. The combined company plans to pay an annual cash dividend of 76 cents a share, about 50 percent more than First Cash’s current payout and double Cash America’s, they said.

Credit Suisse is lead financial adviser to First Cash, with Comstock Capital & Advisory Group LLC and Pi Capital International LLC also advising the buyer and Alston & Bird LLP serving as legal counsel. Jefferies Group is advising Cash America, while Hunton & Williams LLP is the company’s law firm on the deal.

There’s been a regulatory crackdown in the past year on payday loans -- small, high-interest cash advances to people with poor credit who repay the money when they get paid. 

Cash America and First Cash both have retreated from payday lending to focus on pawnbroking, a steadier, lower-growth business that involves lending against jewelry and other valuables. Pawn shops will be exempt from new payday-lending restrictions the Consumer Financial Protection Bureau will unveil this spring.

Cash America is the largest pawn shop operator in the U.S., with more than 800 pawn stores in 20 states. It controls more than 14 percent of the U.S. pawn shop market, according to a report last year from Tulane University’s A.B. Freeman School of Business.

First Cash is the No. 3 U.S. player, with more than 300 locations stateside and another 700 in Guatemala and Mexico, where it makes most of its money. It controls close to 5 percent of the U.S. pawn market.

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