Intrum Stock Soars 37% After Plan to Acquire Lindorff Revealed

  • Intrum agrees to issue 17.9 billion kronor in new shares
  • Nordic Capital to be biggest shareholder after transaction

Intrum Justitia AB soared as much as 37 percent -- the most in its 14-year history as a publicly traded company -- after revealing plans to acquire Lindorff in a $1.96 billion deal that will add scale to Europe’s biggest debt collector.

The Swedish company, which traded 12 percent higher at 311.6 kronor as of 10:39 a.m. in Stockholm, agreed to buy Oslo-based Lindorff in exchange for 64.2 million new shares, it said on Monday. The price for all the shares corresponds to 17.9 billion kronor ($1.96 billion) based on the Nov. 11 closing price of Intrum Justitia. The transaction implies an enterprise value of 40.5 billion kronor for closely held Lindorff.

The companies said the deal is expected to create annual cost synergies of 800 million kronor, as well as “significant further revenue synergies.” Intrum expects the acquisition will be accretive to its earnings per share from the first year and estimates that EPS will grow more than 75 percent on a cumulative basis in 3 to 4 years as synergies are fully realized.

Intrum Justitia Chief Executive Officer Mikael Ericson said at a press conference in Stockholm that the two companies are “more than confident” they can deliver the estimated cost synergies.

“These two companies are a great fit with complementary strengths and will become a leading force in shaping the future of credit management,” they said. “In addition to creating a strong platform for growth,” the merged group “has the potential to drive consolidation in a fragmented industry.”

The move follows an interview in May, in which the CEO told Bloomberg that Intrum was considering a bolder acquisition strategy to take over bigger credit management companies than it had focused on before. Ericson, who took the helm in March, said he didn’t want to “set any limits” for mergers.

Intrum Justitia will own about 53 percent of the shares in the combined group, with Lindorff owners holding the remainder. Nordic Capital Fund VIII, currently the indirect majority shareholder in Lindorff, will become the biggest indirect shareholder in the combined entity.

“This looks very good on paper,” Staffan Aberg, an analyst at Svenska Handelsbanken AB in Stockholm, said by phone. “These are two companies that largely have overlapping operations, both geographically and in terms of what they do, so when they speak of 800 million kronor in cost synergies, it feels reasonable. They won’t need any big magic tricks to achieve that and if they do, it will create a lot of value.”

Intrum Justitia has about 4,000 employees and operations in 20 markets while Lindorff has about 4,400 employees in 13 countries. The combined company will have net revenue of 12.2 billion kronor, and a portfolio carrying value of 18.5 billion kronor, according to a presentation.

The deal is backed by the boards of the two companies but is still subject to approval by Intrum shareholders. It also needs the final go-ahead from regulatory and competition authorities. The companies expect the merger to be completed in the second quarter of 2017.

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